Ethereum’s impending transition to a proof-of-stake consensus mechanism will transform its monetary policy, potentially making ETH rarer than Bitcoin.
Ethereum researcher Vivek Raman is confident that Ethereum’s upcoming move to a proof-of-stake (PoS) system will allow it to dethrone Bitcoin (BTC) as the most prominent cryptocurrency.
“Ethereum has, just from an economic perspective and due to the effect of the supply shock, a chance to turn Bitcoin around,” Raman said in an exclusive interview with Cointelegraph.
The merger, a long-awaited upgrade that will complete Ethereum’s transition from a proof-of-work (PoW) system to a proof-of-stake system, is expected to take place in September. Additionally, The Merge will transform Ethereum’s monetary policy, make the network more environmentally sustainable, and reduce the total supply of ETH by 90%.
“After the merger, Ethereum will have lower inflation than Bitcoin. Especially with fee burns, Ethereum will be deflationary while Bitcoin will always be inflationary. Although, with each halving, the rate of inflation decreases,” Raman pointed out.
If bitcoin will retain its function as digital gold, according to Raman, Ethereum will have a “wider adoption space” as the base layer of the decentralized financial economy (DeFi).
The merger will not reduce Ethereum’s high transaction fees, which remain the main obstacle to scaling Ethereum. This is not a problem, according to Raman, as Ethereum will rely on Tier 2 scaling solutions to support most user activity:
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