- Ethereum blockchain is heading towards a complication with the approaching Merge.
- If the Merge fails, the DeFi ecosystem will be severely affected, users could suffer losses.
- An analyst identified the issues in the DeFi ecosystem and revealed a failsafe strategy to secure funds.
The Merge is a key event for the crypto ecosystem and the DeFi market, especially for cryptocurrencies like Polygon MATIC. An analyst determined the effects of the Merge and explained how users can protect their cryptocurrencies from the event.
Also read: Ethereum Merge knocking on the door, 30,000 blocks away
If the Merge fails, this happens next
The Ethereum Merge is a complicated event since the network is going through several changes. From change in consensus mechanism to how Ethereum is created, ETH holders will see several changes in the cryptocurrency’s ecosystem.
If the Merge fails, the DeFi ecosystem will be severely affected. Proponents believe this can be fixed by following a few simple steps to ensure safety of funds in DeFi. Elerium115, a pseudonymous crypto analyst identified a way for users to access both proof-of-work and proof-of-stake chains after the Merge.
Before the Merge, users should send funds from their main wallet to a temporary wallet. Before the Merge, users need to prepare an empty wallet to use on the Proof-of-Work chain, and the temporary wallet to use on the Proof-of-Stake chain.
This way two different wallets hold funds for two different Ethereum chains.
Post Merge scenarios
Since the upcoming Merge has the potential to disrupt the Ethereum lending market due to the airdrops. Therefore excessive borrowing from ETH lending pools could result in negative user experience.
Aave, Compound and “blue chip” DeFi lenders have voted to temporarily ban Ethereum lending in light of the upcoming Merge. Since the risks for lending protocols are high, users need to swap out their Ethereum derivatives for ETH.
Based on data from DappRadar, Ethereum’s market share in DeFi’s total value declined by 11% in August 2022. The Merge has raised alarms for holders in the crypto community and in order to ensure that they receive the airdrop for ETH PoW, there is a decline in inflow by users.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.