According to a Bernstein research paper, Ether (ETH) requires “very little recovery in economic activity for the token economics to turn favorable,” which supports the “asymmetric growth model” of the cryptocurrency.
The merge, the process by which the Ethereum blockchain switched to Proof-of-Stake (PoS), gave Ether’s Tokenomics nearly 90% lower emissions, potential deflation, and significantly increased staking rewards by more than 5%, according to the study published on Monday. ,
The report added that ether can establish itself as a digital assets market leader thanks to the development of layer 2 blockchains.
The merge, which involved verifying transactions and switching the network from proof-of-work (PoW) technology to a more energy-efficient PoS consensus mechanism, was the first of five planned upgrades to the blockchain. Layer-2 blockchain is built on top of layer-1 blockchain to reduce scaling and date issues.
Decentralized financing (DeFi), non-fungible-token (NFT) exchanges, and token transfers are driving the majority of the current burn activity. According to Bernstein’s projection, ETH’s deflation might reach roughly 4% annually.
The estimated breakeven level of the daily fee required to completely offset the gross ETH issuance is assumed to be around 2,100 ETH, which stands at the current level, indicating that there is a slight decrease in the amount of supply still in circulation. .
Increasing transaction speed and affordability is another goal of Ethereum’s modular scaling strategy. More users will be able to join the blockchain as a result, especially because fees will also be lesser.
Ethereum-compatible zero-knowledge (ZK) rollups will continue to be popularized as a result of the Layer-2 scalability scheme. Bernstein estimates that by 2032, the Ethereum stack will have about 500 million monthly active users, up from around 8.5 million currently.
One of the layer 2 architecture methods being researched to boost scalability is ZK-Rollups. ZK-Rollups combine hundreds of transfers into a single transaction, unlike Plasma, which makes one transaction for each transfer. The transfers held in a single transaction will all be broken down and verified by the smart contract.
On the Ethereum blockchain, the validity of the block is presented and publicly recorded using a “zero-knowledge proof” method. ZK reduces the amount of data held in a transaction, reducing the processing and storage resources required to validate a block; Zero knowledge of all data is required.
ZK-rollups are layer 2 Ethereum protocols that would aid in processing transactions off from the main network to boost speed and lower expenses.
