Learn about Ethereum’s Proof-of-Stake Economy


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Hello world!

We are excited to announce the first guest piece published on Web3edge, by none other than the talented @lingchenjaneliu! In her piece she introduces Proof-of-Stake (PoS) and dives deep into Ethereum’s PoS economy.

Web3edge Originals

The Proof-of-Stake Economy After the Merge

The Merge of the Ethereum network took place on September 15, 2022, leading to changes in the fundamentals of the ETH asset. Learn more about Proof-of-Stake, the Ethereum Merge and liquid staking in @lingchenjaneliu‘s latest piece – special thanks to @0xPhillan for reviewing and editing the piece!

Let’s dive in 👇

The Merge of the Ethereum network took place on September 15, 2022, leading to changes in the fundamentals of the ETH asset. Now, holding ETH long-term has become even more attractive for investors due to the following reasons:

  • Decreased ETH issuance: The most visible on-chain impact of the Merge has been the decreased issuance rate of ETH. With Ethereum’s update to Proof-of-Stake, the network drastically reduced the amount of new ETH issued with every block. In the long term, due to a  burning mechanism  introduced with the network upgrade EIP-1559, there’s a possibility that this may make Ethereum deflationary – meaning its token supply could decrease over time.
  • Increased incentives to stake: After The Merge and with  EIP-1559 , Ethereum generates revenue from transaction fees (tips in gas fee) that were not available on the beacon chain. This revenue is incremental to the stakers and providers investors with a strong incentive to stake their ETH. Staked ETH is out of circulation and creates a strong support for the price of the ETH asset.
Figure 1: ETH hodl waves; Source: Coin Metrics

From figure 1, you can see that there are more long-term ETH holders after The Merge as holders have an expectation that in the long-term, the asset price will increase due to the reduced issuance and increased staking demand. After The Merge, the staking demands of investors have steadily increased to the benefit of the entire Ethereum staking economy. It is, therefore, worth scrutinizing the services and infrastructure that support the staking economy.

Knowledge Hub

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Today’s newsletter was written by @0xPhillan for Web3edge.io. Follow @Web3edge_io on Twitter!

This newsletter is not financial advice, I am not a financial advisor. The information provided by Web3edge is for general informational and educational purposes only. Do your own research before investing. See Disclaimers for more information.

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