After Merge, DeFi projects will have to compete with the benefits supplied by the core ETH protocol, according to Lex Sokolin.
As the Ethereum Merge approaches, individuals frequently speculate on its economic implications. Lex Sokolin, the lead economist at ConsenSys, shared his observations in order to assist those anticipating the significant update with a clearer picture.
The specialist explained Merge’s impact on users, developers, and companies. In addition, Sokolin dispelled a number of myths regarding the Merge and discussed how the new event may affect the price of Ether (ETH).
In terms of how the average user interacts with the chain, the economist has assured us that nothing will change. However, after the Merge, users will have a safer option for staking ETH. He emphasised that:
“Right now, betting on the beacon chain involves the possibility that the Merge will not occur. When it happens, though, staking will be more open to more people and less technically risky for those who want to take part.
The expert explained that the Merge’s potential to standardise the notional interest rate for the whole Web3 domain via the ETH yield has implications for both corporations and developers.
“We anticipate that the risks of projects and business possibilities can be compared to staking ETH in a risk-adjusted manner.”
This may also have a big impact on the decentralised finance (DeFi) industry, as businesses will need to compete with the profits provided by the core system. “This should mature the market and raise opportunity costs for yield-seeking investors in high-risk areas,” he added.
The expert stressed that the Merge will not yet provide for large throughput or reduce gas prices when asked about common misconceptions about the technology. However, the Merge lays the groundwork for potential future developments. Sokolin continued by saying that the problem of the ESG effect is one of Web3’s least preferred narratives, but that this will be eliminated after the Merge.