How will the Ethereum Merge impact other crypto projects and tokens?

Ethereum merge

Key Takeaways

  • Polygon, Ethereum’s layer-2 scaling solution of choice, will become 99.91% more energy-efficient post-Merge.
  • Layer-1 blockchains like Cardano and Solana will have to prove themselves post-Merge to exhibit positive price action.
  • Chainlink, an off-chain integration layer built atop Ethereum, will continue to be helpful for developers looking to build on Ethereum.

Ethereum needs no introduction. The second largest crypto project by market cap also serves as an app development platform, albeit decentralized. While this might be a gross oversimplification of Ethereum’s capabilities, it does paint a picture of how this blockchain ecosystem has revolutionized the crypto space in terms of innovation.

Yet, it is important to put things in perspective, keeping the big picture in mind. With the Merge—Ethereum’s transition from a “proof-of-work” consensus mechanism to a “proof-of-stake” mode—already upon us, it isn’t just about Ethereum anymore. For the larger crypto world badly in need of some good news, the major systems upgrade would not have come at a more opportune time. Here, we discuss some of the other important projects that are expected to power through the post-Ethereum Merge. This article will focus on five such projects. Buckle up as we delve deeper.

Ethereum’s many lives and partners

Ethereum began life way back in 2015 as a Layer-1 blockchain. Layer-1 refers to a blockchain that can independently handle on-chain transactions. As it grew, it got slower and slower—eventually having to rely on side chains to speed up transactions. The need for speed led to the emergence of Layer-2 blockchains such as Polygon and Loopring.

But there is more to the Ethereum story. Several ambitious Layer-1 projects were also launched over time to compete with Ethereum. Some were even called “Ethereum Killers,” courtesy of the growing community. Cardano and Solana are two of those projects that are still around and gaining popularity by the day.

Lastly, Ethereum, the hotbed of decentralized applications and smart contracts, still needs to rely on external data sources or oracles to become useful to BUILDers. Chainlink, for instance, is a perfect sample of an oracle-specific project. Let us discuss some of these projects that are closely associated with the Ethereum blockchain, beginning with Polygon.

Project 1: Polygon

Polygon, as we have seen earlier, is a layer-2 blockchain platform meant to assist Ethereum. Initially, Polygon (Matic Network) was a scaling solution for Ethereum but has since outgrown the tag. The platform has made its name as a capable blockchain infrastructure development platform, a powerful sidechain to Ethereum, and a network capable of supporting 65,000 TPS (transactions per second) at its peak.

How will the Merge impact Polygon?

MATIC— Polygon’s native token— has gained more than 200% in the last 90 days. This shows that even Polygon is riding the “Merge” wave and looking good enough to scale newer heights in the future.

The positive price action can be attributed to Ethereum’s supposed scaling bottleneck that is expected to continue even post-merge. Despite the Merge leading to the PoS transition, Ethereum’s speed and scalability woes will make users persist with the likes of Polygon.

Polygon also stands to gain on the environmental front. The Merge is expected to erase almost 60,000 tons of carbon footprint relevant to the Polygon ecosystem, according to a tweet thread posted by Polygon’s official channel.

Close to 99.92% of network emissions will be neutralized once the positive effects of the Merge set in, pushing Polygon closer towards its goal of turning carbon negative.

Here is the detailed thread that you should check out:

 

Project 2: Loopring

Loopring is yet another layer-2 scaling solution specifically meant for building DEXs (Decentralized Exchanges). Loopring, unlike Polygon, is mandated with shaping the future of decentralized finance in the Ethereum ecosystem.

This ecosystem can reach peak transaction speeds of 2000+ TPS, and that too at a fraction of the transaction fee levied by Ethereum. Much like Polygon, even Loopring uses ZK knowledge proofs to achieve better speeds.

How will the Merge impact Loopring?

LRC— Loopring’s native token— has gained over 50% over the past 30 days. While it scaled a high of $0.52 during this period, some sell-off pressure showed up— pushing the prices down to $0.36, as of 11 September 2022.

What’s more, post-merge Loopring’s DEX building capabilities will retain their allure, as financial transactions on Ethereum are still expected to be pricey and slow due to the sheer size of the ecosystem.

As of mid-August 2022, 175K Loopring addresses were seen making transactions. But the number of active addresses was barely above 400, a warning sign for Loopring.

Yet, it is important to understand that as Loopring is a DeFi-first ecosystem, it might initially see some negative sentiments and price pullbacks post-merge. This is due to the fact that Ethereum’s transition to PoS will slow down the adoption of DeFi for a while, with higher liquidations expected over a few days from now.

Read this piece to know more.

Despite the expected short-term sluggishness, Loopring looks like a good and rewarding project, especially in the mid-to-long term.

Project 3: Cardano

Cardano is a layer-1 (Ethereum-like) blockchain that is already on the Proof-of-Stake ecosystem. What works for Cardano is that it is easily one of the more eco-friendly projects around. Read this post to know more.

Cardano is similar to Ethereum as it also offers smart contract functionality. However, Cardano’s smart contract capability is not as diversified as the latter.

How will the Merge impact Cardano?

More than the Merge, it is the post-Merge week that is important for Cardano. On 22 September, Cardano is supposed to get a network upgrade of its own—the Vasil upgrade. The upgrade is expected to increase the blockchain’s speed and improve its smart contract capabilities. A successful Vasil fork close on the heels of the Merge can be great for ADA’s (Cardano’s native token) price action, which has been choppy for a while now.

Yet, with the Merge already setting the expectations high for top crypto projects, any delay in Vasil’s timeline might hurt ADA’s price.

However, none of this is financial advice. As always, buyer discretion and DYOR are recommended.

Project 4: Solana

Solana is a popular layer-1 solution, often touted as the Ethereum killer. However, it still has a long way to go before it can actually compete with the new and improved Ethereum. In fact, Solana figures on our list, thanks to its Proof-of-Stake consensus mechanism.

Solana also comes equipped with PoH (Proof-of-History) consensus in addition to PoS, making it a lot more scalable on paper.

However, Solana has been plagued by network shutdowns and centralization issues.

How will the Merge impact Solana?

With the Merge transitioning Ethereum to PoS (Solana’s territory), expect any deficiency in the Solana ecosystem to be in the spotlight. Moreover, as Solana primarily houses DeFi apps, expect it to slow down a bit around the merge as DeFi would come under pressure on account of sucked-out liquidity.

However, the negative (liquidity effects) are only expected to be short-term. Yet, Solana will have to improve its overall standing as a stable network to be able to put up with Ethereum in the years to come. More so, with the Merge being only the first step towards making Ethereum capable of handling 100,000 TPS.

In simpler words, for Solana, Ethereum Merge is somewhat like “Sharma Ji’s son topping the class.” And that means great expectations and a lot of judgment.

Project 5: Chainlink

Chainlink is a decentralized data provider or an oracle network, allowing smart contracts to connect and interact with real-world data. With off-chain data access, Chainlink helps smart contracts evolve into “hybrid” smart contracts.

It is to be noted that Chainlink is built atop the Ethereum blockchain, allowing developers to use it for BUILDing games, NFT projects, DeFi apps, and the like.

How will the Merge impact Chainlink?

LINK— Chainlink’s native token—has gained close to 80% in the past three months. With the bear market in action, it is LINK’s deep positive association with Ethereum that helped it move past multiple resistance levels.

With Ethereum transitioning to the PoS protocol, we can expect more developer adoption. And more developers will mean more apps, which would require more connections to off-chain resources. Thus, Chainlink stands to benefit directly from Ethereum’s growth.

In early August, the Chainlink network even showed its solidarity with the PoS chain of Ethereum— making a strong statement to the entire PoW community. So, peeps, Chainlink is here to stay, in health and in sickness, with the Ethereum community.

Gains can vary across tokens

The five tokens under discussion will be in the limelight even after the euphoria over the Merge dies down. As the new entrant Ethereum lights up the proof-of-stake universe, each of these tokens will see a boost in price action for their native tokens.

While Layer-2 protocols like Polygon and Loopring are expected to attract some positive action right away, Ethereum competitors such as Cardano and Solana will have to prove themselves before their native tokens can soar higher. And for an integration chain like Chainlink, a growing Ethereum network will mean a rising native token. Overall, it will be a few action-packed months to watch before the year winds down.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user’s own risk.

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