February 1, 2023

Ethereum Triple Halving - Hidden Truth Every Investors Must Know

For years, the Ethereum blockchain, which has been the second-largest cryptocurrency, has struggled with growing issues like increased gas prices, sluggish transaction rates, and inadequate scalability. These are the justifications for the Ethereum Merge. This page is all about the Ethereum triple halving aka the switch from Proof-of-Stake to Proof-of-Work as the consensus algorithm. Let's examine it in greater detail.

What is Ethereum Halving?

The Ethereum triple halving is a critical result of the ETH merger, having good long-term consequences. The merge is an improved version of the Ethereum blockchain that verifies transactions through staking using a proof-of-stake consensus process.

In essence, it is anticipated that the Merge will result in a significant decrease in the supply of ether. The annual issue of ether to miners will be cut, the current currency will be “burned,” and staking requirements that will remove ether from circulation will all contribute to this.

These processes when combined will result in a significant deflationary pressure, which is equivalent to halving the Bitcoin ecosystem three times. Therefore, the term “triple-halving”. Many proponents of cryptocurrencies think that the triple halving would increase demand for ether and even cause it to surpass Bitcoin's value within a year.

What is Ethereum vs Ethereum 2.0?

The sheer amount of traffic on the Ethereum network has caused difficulties. As an illustration, the gas fees that miners receive in exchange for their labor might occasionally be extremely costly. After Ethereum 2.0, it might get better because the network will need to be protected by validators that stake Ether. In exchange, these validators are required to lock in 32 Ether. While the admission threshold of 32 Ether remains high, there are other access points available for those with smaller Ether holdings or non-technical participants.

Proof of stake uses much less energy than proof of work, making it speedier and more environmentally friendly. PoS is anticipated to boost the network's scalability and reduce its energy consumption by about 99.95%. As a result, staking is evidently 2,000 times more effective than conventional mining.

Ethereum 2.0 promises to support 100,000 transactions per second, compared to the network's current capacity of 25 to 30 transactions per second.

The sharding technique's implementation will provide that level of scalability. With this modification, 64 "shard chains," which process transactions concurrently, will be used. Theoretically, it can record transactions 64 times faster than the present Ethereum network.

Ethereum has accomplished the largest evolutions in its history with proof of stake and sharding. It will have a significant impact on how numerous niches operate.

Ethereum Halving - From Mining to Staking

You must be familiar with staking to comprehend the Ethereum halving. After Ethereum's merger is complete, the mining process is replaced with the staking procedure for transaction verification.

Users that want to take part in the Ethereum transaction verification process must stake a particular quantity of cryptocurrency. According to the amount of cryptocurrency, each validator has staked, an algorithm determines which validator gets to add the following block to a blockchain under a proof-of-stake paradigm.

Investors must wager at least 32 ETH to become an Ethereum validator. There are currently more than 300,000 Ethereum validators working. The more ETH each validator stakes, the more likely it is that they will produce blocks. Every time a validator generates a block, they are rewarded in Ethereum for carrying out validation tasks.

Staking can be rather expensive for the typical investor, given that Ethereum is now priced at close to $1,600 and the minimum requirement of 32 ETH is more than $50,000.

Staking pools, groups of Ethereum stalkers who pool their resources and divide the benefits, are another option for individual investors. Investors unable or unwilling to commit 32 ETH on their own can also use the staking services offered by major cryptocurrency exchanges.

Ethereum's staking yield now ranges from 4% to 7% every year (APR). Staked ETH (stETH) has been blocked throughout the merge preparation process.

Ethereum Halving - Merge’s Impact on ETH Supply

The Merge is part of Ethereum's triple-halving process. It symbolized the network's switchover from proof-of-work to proof-of-stake that took place in September 2022. To comprehend how the merge would affect the supply of ETH, we can separate the two main factors that affect it into issuance and burn.

The process of creating ETH that didn't already exist is known as issuing ETH. 

Since The Merge, the execution layer issuance has been zero. Under the updated consensus rules, proof-of-work is no longer an acceptable method of block production. Beacon blocks, which are published and verified by proof-of-stake validators, contain all execution layer activity.

Consensus layer issuance is still the same after The Merge. It pays token payouts to validators that vouch for and suggest blocks. Validator incentives that are controlled by the consensus layer continue to accumulate in validator balances. Stakeholders will be encouraged to remove their earnings/rewards when validator withdrawals are permitted (balance over 32 ETH). Otherwise, these funds wouldn't be increasing their stake weight (which maxes at 32).

Stakeholders have the option to exit and withdraw their whole validator balance after withdraw functionality is activated. The simultaneous departure of validators is capped to maintain the stability of Ethereum. Depending on the total amount of ETH pledged, only six validators may leave in a particular epoch (6.4-minute period). The maximum number of leaving validators will gradually decrease to four as more validators leave, to purposefully avoid huge disruptive quantities of staked ETH from being withdrawn concurrently.

The burning of ETH is the destroying process of the existing ETH, removing it from circulation.

The pace at which ETH is burned is the opposing force to ETH issuance. With Ethereum, a minimum fee is required to be paid, which varies continuously (from block to block) based on network activity. The fee must be paid in ETH for the transaction to be accepted. During the transaction procedure, this charge is burned, taking it out of circulation.

In addition to the London upgrade's fee burn, validators may also be penalized for being offline. Workers may also be terminated for disobeying particular rules that jeopardize network security. These fines cause the balance of that validator's ETH to decrease. They are effectively burned/removed from circulation because they are not immediately paid to any other accounts.

How Ethereum Triple Halving Works

Ethereum halving is simply a reduction in the rewards given to miners, validators, or anybody else who benefits from the issue of new tokens or coins.

The U.S. dollar is an inflationary currency, meaning that as more dollars are issued, its value diminishes over time. In contrast, the number of bitcoins that can be produced is limited to 21 million. Its value should remain stable over time, making it a hedge against inflation. However, the regular halving process turns it into a deflationary currency whose value keeps rising.

Ethereum is also a deflationary currency as a result of the triple halving. The method consists of three distinct steps, as the name would suggest.

  • Decreased Issuance

Miners received compensation for completing blocks on the Ethereum network before the Merge. But as of right now, stalkers are responsible for validating new Ethereum blocks, and the initial phase of the triple-halving process will significantly diminish the benefits they receive. “Annual issuance of ETH will decline from 4.3% pre-merge to an anticipated 0.4% post-merge,” wrote blockchain engineer Montana Wong in a tweet.

The 99.99% reduction in energy consumption that the Merge achieved allowed for this 10-fold decrease in ETH issuance, which will heighten deflationary pressure by reducing supply.

For instance, if $20 million worth of ETH is traded daily on the market to pay for the energy needed to safeguard the network, after the merge, that amount will drop to $2 million.

  • Burning

The second deflationary strategy is the burning method. Tokens are doomed to be lost forever when they are transmitted to a wallet without an access key at that point. The Ethereum network destroyed over $6 billion worth of tokens in March, just before the Merge. Miners were still collecting ETH in March, and the burning process divided miner payouts between base fees and tips. The platform purposefully burned the basic fees while the miners pocketed the tips.

  • Staked Retractions

Staking, the new post-merge validating procedure, is directly related to the third and final deflationary mechanism. Owners of ETH can use validators to lock some of their money in the network; these individuals are then in charge of safeguarding the subsequent block on the chain.

Stakers receive compensation for securing their ETH. However, the network now prohibits investors from selling their stakes until six to twelve months have passed since the September Merge. Then, to prevent a deluge of locked-up holdings from flooding the market, withdrawals will only be permitted in queue form.

Impacts of Ethereum Triple Halving on Crypto Investments

We can state the obvious regarding Ethereum's triple halving even though the following is not financial advice. Prices would typically increase as a result of a decreased supply or rate of supply. Nikhil Shamapant, the inventor of the Triple Halving theory, firmly believes this. He thinks that Ethereum might stand to gain from the Triple Halving even more than Bitcoin does from its four-year cycles that reduce BTC mining earnings by 50%.

Proof-of-stake deployment is anticipated to reduce selling pressure by around 30%. The proof-of-stake method incentivizes miners to sell ETH after receiving their reward. Proof-of-stake and triple halving, on the other hand, motivate miners to use their ETH payouts for staking operations.

The triple halving, almost similar to three Bitcoin halvings, lowers the ETH inflation rate from 4.3% to 0.43%. In addition, the daily block reward is decreased by one-tenth.

In conclusion, the triple halving of ETH causes:

  • highly stable network.
  • better network stability and security.
  • increased ETH scarcity
  • reduced energy use

Without a doubt, the network has seen the most dramatic transformation with Ethereum 2.0. It paves the way for a time when Ethereum can easily handle applications from a wide range of industry verticals and makes it more available to the public. Ethereum 2.0 makes it possible for Ethereum to gain more widespread adoption across numerous industries.

With the Merge, Ethereum will reduce its energy use by about 99%. Additionally, many believe that the triple halving's deflationary pressure will cause the price of ETH to reach previously unheard-of heights. Ethereum has the potential to ignite a market upswing and alter the negative narrative that has been permeating the cryptocurrency space for the past few months.

Of course, no cryptocurrency can be viewed in isolation, and Ethereum is no exception. Its value is affected by several macroeconomic factors, including record inflation, which has caused a technical recession in the United States and prompted the Federal Reserve to pursue a policy of quantitative tightening as a result. Markets have fallen as a result, and price expectations are still pessimistic because there is no end in sight to rising interest rates.

Simply put, given the current macro environment, nobody knows how this will turn out. We are all aware that the economy has entered a bear market, and as a risk-on asset, cryptocurrency has been particularly affected. Additionally, some believe that the Merge is already priced in and will result in price reductions, while others believe that it won't be until after it really happens.

Whatever stance you take on this impending crypto moment, keep in mind that it's crucial to save your cryptocurrency offline in a hardware wallet. Every year, there are more and more hacks and frauds, and this one is no exception.

How Ethereum Triple Halving Affects the Price of Eth?

Prices fell significantly when the Ethereum Triple Halving process first started. Although ETH fans had been looking forward to The Merge for years, token prices fell by more than 20% in the days after the triple halving. Coin value decreased from approximately $1,700 to about $1,200.

This could seem worrying, but analysts point out that the crypto slump was primarily caused by day traders who made irrational bets in the days before The Merge. The Merge encouraged the price of ETH to stabilize after a brief time in which it was overinflated. Prices have since fluctuated within a reasonable range, but they have been rising steadily. Early in March 2023, the price of ETH is just above $1,660.

After Ethereum Triple Halving Price Prediction

Ethereum triple halving's first phase was the merge. Everyone predicted that the price would be better. But Eth crashed in price. It was unexpected, indeed, but you shouldn't feel discouraged. Ethereum is still the second biggest cryptocurrency with a market cap of $222,801,091,107.

Some crypto specialists predict that $7,336.62 will be the least expensive cryptocurrency in 2025. The highest price imaginable is $8984.84. Several experts predicted that by the end of the first half of 2025, Eth will reach $11317.

However, you should remember that we're talking about 2025. Many of these predictions are predicated on Ethereum 2.0's successful launch and first performance. So, Ethereum must resolve its problems with high gas fees.

After years of price tracking, experts predicted what Ethereum would cost in 2030. It can be exchanged for as little as $48,357.62 and as much as $57,877.63. Hence, on average, you can estimate that ETH will cost around $49,740.33 in 2030.

Long-term Ethereum price forecasts can be a helpful tool for market research and understanding how major platforms expect that upcoming changes, such as the Ethereum 2.0 upgrade, would affect pricing.

There is no guarantee that the prediction will be right. So, do not invest blindly. Do your own research. Don't invest money that you can't afford.

Ethereum Halving - FAQ

What Is the Ethereum Triple Halving?

The triple halving event for Ethereum combines EIP-1559 and ETH 2.0, a proof-of-stake protocol. It is supposed to reduce the selling pressure by 30%. That has an effect comparable to three halves of the value of bitcoin, the most well-known cryptocurrency in the world.

What is Ethereum 2.0?

The Ethereum blockchain has been updated with Ethereum 2.0, sometimes referred to as Eth2. The upgrade allows Ethereum's network to handle more transactions simultaneously while preventing bottlenecks.

Will Ethereum 2.0 Replace Ethereum?

No. The only Ethereum native coin will continue to be ETH, and ETH 2 is not a brand-new cryptocurrency. The new PoS blockchain that will go live as Ethereum's primary blockchain network following the integration is simply referred to as "ETH 2." Although some cryptocurrency exchanges (like Coinbase and Kraken) mention "Ethereum 2 (ETH2)" as an asset that can be staked, there isn't a new cryptocurrency by that name.

What is Proof-of-Stake?

Proof of Stake requires participants to use their own cryptocurrency holdings as security. In exchange, they'll get the opportunity to have their transaction history made public and get incentives. Given that there is no need for energy-intensive computing, it is thought to be better for the environment. PoS is more equitable because anyone can try to earn rewards. It's not just for those who can buy massive computing arrays.

What is EIP-1599 Fee Burn?

On August 5, 2021, an upgrade called Ethereum Improvement Proposal (EIP) 1559 took place. The intention was to modify Ethereum's method for calculating and handling network transaction fees. The upgrade used a system of block-based base costs and sender-specified maximum fees to make Ethereum transactions more efficient. It was presented in a hard fork London package. Together with EIP 1559, four other EIPs will be in London. EIP-1559 will alter how the Ethereum network computes and handles your network charge if you're attempting to carry out a transaction directly on the Ethereum network.

When is the Next Ethereum Triple Halving

The next stage of the Ethereum triple halving is Sharding. It will release in 2024. The database would be split horizontally to spread the load. It will work together with layer 2 rollups. It will divide the burden of handling large amounts of data that rollups need over the entire Ethereum network.

Final Words

To summarize, ETH is going through

  • The distribution rate's exponential decline.
  • Reduction in supply as a result of the burning of a portion of each transaction charge
  • Decrease in supply since staked ETH must be locked before withdrawals may be made.

These three aspects come together to form the “Triple Halving,” an extraordinary experience. The “triple halving” of Ethereum seeks to enhance tokenomics while enhancing its utility. The dramatic decrease in issuance and circulating supply will assist manage the supply of ETH and its price since Ethereum's infinite supply continues to be a difficult aspect of its tokenomics.

The “triple halving” will probably enhance the impact of growing demand on price development as the network continues to expand and provide more utility.

Finally, before making any cryptocurrency investments, always remember to conduct your research. Furthermore, kindly remember that this content's purpose is education; no part was intended to be financial advice.

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