Economic Design Changes Will Affect ETH Post-Merger Value, Says ConsenSys Director

Lex Sokolin said that after the merger, DeFi projects will have to compete with the returns offered by the base ETH protocol.

As the Ethereum merger approaches, many are speculating about its economic effects. To provide a clearer view for those anticipating the major upgrade, Lex Sokolin, ConsenSys' chief economist, shared his insights in an interview with Cointelegraph.

The expert discussed the effect of the merger on users, developers and businesses. Additionally, Sokolin also cleared up some misconceptions about the merger and explained how the new development may impact the price of Ether (ETH).

At the user level, the Economist said the average user will be able to use the channel as they normally do, but a significant impact for post-merger users is having a less risky way to bet ETHs. He explained that:

“Currently, staking on the beacon chain carries the risk that the merge will not occur. But once that's done, participating in staking is more accessible and involves less technical risk. »

In terms of effects on businesses and developers, the expert indicated that the merger could normalize the notional interest rate for the entire Web3 space via the yield of ETH. This could potentially eliminate the need for speculative financial engineering projects, according to Sokolin.

“We expect that the risks of projects and business opportunities can be assessed against simply staking ETH on a risk-adjusted basis.”

It can also significantly affect the decentralized finance (DeFi) space, as the products have to compete with the returns offered by the main protocol. “This in turn should mature the market and create opportunity costs for investors looking for yield in places that are too risky,” he added.

When asked about their expectations and