Ethereum has just completed its merge to a proof-of-stake consensus from proof-of-work, could the primary source of validation bring in more institutional investors?
- “They’re [instiutional investors] looking for yield,” said FalconX CEO Raghu Yarlagadda in a recent interview with CoinDesk, “with the ETH merge, the possibility of generating a sustainable, stable yield is interesting” he added.
- PoS is a consensus mechanism where transactions are validated through users staking their coins, in return for staking users will receive a small fee for playing their part. Currently, on Ethereum, this may yield users around 10-15% annually which makes it an alternative to typical bonds.
- The reduced energy consumption could also make for a more eco-friendly investment in institutional eyes. Environmental, Social, and Governance (ESG) is a metric popular amongst various institutions, so Ethereum reducing its energy consumption by 99.95% and reducing the world’s energy consumption by 0.02% is a big plus.
- Ethereum will also be more scarce now the merge has happened with annual issuance dropping ~90% to 600,000 per year and burning of Ethereum transaction fees, along with staking taking even more Ethereum out of circulation.
- Although it may attract institutional investors, using it in an institutional scene may not be the most efficient thing to do as of yet. Currently, Ethereum has 15 transactions per second (TP/S) compared to VISA with ~1,700 and Solana at 2,300. The merge promises to make Ethereum more accessible which could bring scaling solutions to light that improve its lacking metrics.
See Related: The Misconceptions With The Ethereum Merge
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