Pantera Capital CEO Dan Morehead is highlighting the benefits of Ethereum (ETH) transitioning to a proof-of-stake (PoS) consensus mechanism.
In Pantera’s latest Blockchain Letter, the crypto-focused hedge fund’s top executive explains that one consequence of the network’s upcoming Merge will be the elimination miner rewards and thus a reduction in the daily issuance of new ETH from 14,600 to 1,600 tokens.
According to Morehead, this would shift the leading smart contract platform toward being a deflationary asset.
“After ‘The Merge,’ Ethereum’s issuance rate of 1,600 ETH/day in staking rewards minus the fees burned nets out to zero. Subtracting penalties incurred by validators (e.g. getting slashed for misbehaving) and ETH that is lost over time, this would make Ethereum issuance net negative.
In the context of today’s inflationary environment, Ethereum’s shift towards a potentially deflationary asset is an exciting prospect.”
The newsletter goes on to discuss how the switch away from proof-of-work (PoW) will make the project more eco-friendly.
“Moving to proof-of-stake will have a major impact on Ethereum’s sustainability with an estimated reduction in energy consumption by 99.95% – obviously a big improvement from an environmental, social, and governance (ESG) perspective.
The 99.95% energy reduction will come from Ethereum’s transition away from proof-of-work – a process that uses electricity and hardware as the main costs to secure the network.
In a proof-of-stake system, the main cost to secure the network is capital in the form of staked tokens, and it does not require much electricity at all.”
Just this week, the Ethereum Foundation provided a detailed update about the Merge’s timetable. The process will be initiated in several phases, starting with the Bellatrix upgrade on September 6th followed by the formal transition sometime between September 10th and 20th.
The Merge aims to address the network’s scalability issues by setting the stage for future upgrades, including sharding.
Ethereum has been feeding off a slight mid-week rally after tumbling from above $1,850 over the weekend. ETH is up 8.3% over the past 48 hours and trading for $1,701.
Pantera Capital currently participates in 100 venture investments and has $4.7 billion in assets under management.
Don’t Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
Check Price Action
Follow us on Twitter, Facebook and Telegram
Surf The Daily Hodl Mix
 
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/YanaBu/Sol Invictus