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Ethereum (ETH) is looking to emerge as an energy-efficient and environmentally friendly crypto asset, following the blockchain’s planned Merge” in September, Citigroup said in a research note.
The upgrade which will change the network from a proof-of-work (PoW) system to the rather environmentally friendly proof-of-stake (PoS) will bring some potentially positive benefits.
The bank’s research report concludes that the first in a series of five planned network upgrades can transition Ethereum to a deflationary asset, provide a lower energy intensity and offer the “potential road map to a more scalable future through sharding.”
Bank analysts say that the move to PoW will decrease energy expenditure by 99.95%. In addition, overall issuance of ETH will decrease by 4.2% yearly, with the asset eventually becoming deflationary and enhancing its position as a store of value.
The Merge upgrade will also pave the way to further reduction in network fees and increase in transaction speeds, which are expected to come in another upgrade dubbed “Surge”.