Ethereum has announced it will merge its mainnet with the Ethereum 2. 0 Beacon Chai, moving from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism.

The move is attracting investors. The event, called the Merge, is planned for 19 September, but the timeline is not concrete. The PoS consensus mechanism is expected to make Ethereum more secure, energy efficient, and environmentally friendly.

Institutional investors are piling into Ether- (ETH)-based digital asset funds, which have recorded seven straight weeks of positive inflows. Said inflows reached USD 16. 3 between 1-7 August, adding to a total of USD 159 million in inflows over the previous seven weeks.

The rise in market sentiment for Ethereum-focused products is largely due to greater clarity relating to the upcoming Merge. The Goerli and Prater testnet merge is also expected to take place this week, which will be the last scheduled dress rehearsal before the mainnet Merge takes place in less than six weeks’ time. As analytics teams see it, derivatives traders are placing directionally obvious bets for Ethereum, specifically relating to the upcoming Merge.

The ETH options and futures market is positioned in backwardation (as Glassnode suggests), a situation in which the current price of an asset is higher than the prices trading in the futures market. However, the jury is still out as to how the Merge will ultimately affect Ether’s price. Why the hype? As CryptoPotato puts it, Institutions are pouring in the capital as sentiment around the world’s second-largest crypto asset sees a positive reversal which could spur further buying behaviour.

The Ethereum 2. 0 will have improved network efficiency, and security, in addition to reducing carbon footprint by reducing energy consumption by over 99%, something that its predecessor was heavily criticized for. CoinDesk reported that, as per Citigroup research, the Merge will have several consequences.

These include lower energy intensity, the transition into a deflationary asset and a potential road map to a more scalable future through sharding. The Merge, the first of five planned upgrades for the network, may increase transaction speeds by only 10% by reducing block times, according to the Citigroup’s research. The upgrade, however, lays the path for the ‘Surge,’ which is the next planned upgrade for the network and promises to bring 100.

000 transactions-per-second (TPS) capability to the blockchain. The Merge means that block time will drop to 12 seconds from 13, and that could result in a small decrease in fees and an increase in speed. Switching from PoW will reduce overall issuance of ether (ETH) by 4.

2% a year, and with ether eventually becoming deflationary, this may improve the case for the token as a store of value. Post-Merge ETH could be viewed as a relatively energy-efficient and environmentally friendly crypto asset, as energy expenditure is expected to decrease by 99. 95%.

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