How the Ethereum Merge could affect stablecoins

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ethereum merge

The Ethereum merge date is nigh and the leading stablecoins have already started to pledge their support for the upcoming Ethereum merge. But how will The Merge impact stablecoins?

While the Ethereum hard fork outcry is equally loud, the Ethereum co-founder Vitalik Buterin has already dismissed the hard fork possibility, adding that the network will soon function on a PoS mechanism.

However, several crypto enthusiasts have raised questions on how the great Ethereum merge will impact the stablecoin ecosystem. Will it disrupt it or improve it? Let's find out.

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Ethereum merge and its impact on stablecoins

In a report by DappRadar, the firm noted the stablecoin market heavily depends on the Ethereum blockchain.

The report further shared how Circle and Tether have already pledged their support to The Merge scheduled to be deployed on September 15.

Several crypto enthusiasts assert that Ethereum's shift to PoS will considerably impact the stablecoin ecosystem, with instability also triggered for stablecoins hosted on Ethereum.

Per the new report, several crypto entities like MakerDAO and Grayscale have been vocal with their concerns adding that The Merge could have negative consequences on the holistic trading of cryptocurrencies as a whole.

In a comprehensive Twitter thread, MakerDAO shared its concerns regarding The Merge and how it could lead to issues such as perpetual contract backwardation and negative funding. It further stated that the Merge could also trigger a selling pressure access chain in PoW.

Grayscale added how The Merge could be lethal for tokens that exclusively run on Ethereum. The firm outlined how the merge could birth a new fork that may pose unprecedented threats to the blockchain.

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Ethereum developers issue clarifications

However, amid all this, the Ethereum developers have clarified the air of suspicion surrounding the upcoming Merge, adding that the Ethereum shift to PoS is on a base level, which will not affect its ecosystem as a whole.

Furthermore, The Ethereum Foundation also issued a new blog aiming to clear the air of apprehension surrounding the upcoming merge, adding that the shift will not impact users' funds or assets in any way. It said:

No history is lost. As Mainnet gets merged with the Beacon Chain, it will also merge the entire transactional history of Ethereum. You don't need to do anything. Your funds are safe.

For stablecoins, one of the most important aspects is right there in its name - stability. Holders and creators alike will be hoping for little disruption when the merge happens.