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Investors are watching as the world's most popular blockchain approaches a major upgrade that will alter its architecture and make it more environmentally friendly. Mark Cuban, a billionaire and known crypto enthusiast, is one of them.
Ethereum wants to switch from a proof-of-work to a proof-of-stake paradigm in a process known as the "merge." Though the exact date has yet to be announced, developers believe the merger will take place this summer.
Ethereum's crypto mining would become obsolete after the merger, significantly reducing Ethereum's environmental effect. Because fewer coins are projected to be created, the supply of new Ether is also predicted to decrease. Furthermore, the security of the blockchain against potential attacks is expected to improve. The Ethereum network is projected to see an increase in institutional investment.
"I'm really bullish" on the suggested adjustments that will arise from the merger, Cuban told Fortune.
According to Cuban, there are two major modifications following the merger
The merger is significant to Cuban for two reasons.
He began by emphasizing the significance of Ethereum's transition to proof of stake.
Ethereum currently uses proof of work, in which miners must solve complicated problems in order to validate transactions. This technique necessitates a significant amount of computer processing power and is frequently criticized for its negative environmental impact.
Users will be able to validate transactions based on how many coins they contribute, or stake, with the planned update to proof of stake. Users who stake more coins have a better chance of being selected to validate transactions on the network and earning a reward.
Ethereum currently has two chains running in parallel: proof-of-work and proof-of-stake. While both chains have validators, only the proof-of-work chain handles users' transactions at the moment. Once the integration is complete, Ethereum's blockchain will entirely transition to the Beacon Network, a proof-of-stake chain that will make mining obsolete.
As a result, Ethereum's energy usage is expected to be reduced by 99 percent.
Second, after the merger, Cuban is curious in how "reduced Ether issuance" may "potentially make it deflationary."
He's alluding to the fact that the supply of Ether is projected to decrease after the merger as fewer coins are expected to be minted.
"Following the merger, the quantity of ETH produced is expected to shrink by 90%, resulting in similar amounts of fees reducing Ether's supply by as much as 5% a year," noted blockchain analytics firm IntoTheBlock in its newsletter.
The price of Ether may climb if demand rises while supply falls. However, it is impossible to predict the price of any asset in the future.
Nonetheless, some believe that following the merger, Ether will become a deflationary asset, or one with diminishing supply that can be utilized as a store of value. Bitcoin is already regarded as a safe haven asset.
Cuban confirmed to Fortune that he has no funds invested in the Beacon Chain, although he does hold Ether and Ethereum-based non-fungible tokens (NFTs). He's also invested in a number of firms that are developing, scaling, or interacting with Ethereum.
As a self-described Ethereum maximalist, Cuban has regularly expressed his enthusiasm for the blockchain. It's largely due to Ethereum's smart contracts, which are collections of code that run on the blockchain and implement agreements, according to him.
In March 2021, he stated, "What actually altered everything was smart contracts." "Then came smart contracts, which gave birth to DeFi [decentralized finance] and NFTs [non-fungible tokens]." That was the turning point in the game. That's what piqued my interest. That's why it reminds me of the internet."
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