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Coinbase exchange published research on the “TheMerge” completion & negative impact on the price of Ethereum (ETH).

Coinbase is a leading US-based Nasdaq-listed crypto exchange, known to provide crypto services under a high compliance regulatory framework. The exchange has highly talented crypto & blockchain developers and also researchers. At present, Coinbase is under regulatory hurdles because of the US Securities regulatory body’s investigation against the product & services of the exchange.

Coinbase researchers noted that there are huge chances that the majority of the Layer2 scaling solution provider blockchain networks may complete the whole Ethereum ecosystem need through the technical support to the Ethereum network. In short, Layer2 scaling solution provider networks may steal the whole revenue of the Ethereum blockchain because people will depend on Layer2 scaling solution provider networks to facilitate transactions.

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According to the data available from Token Terminal, Ethereum generated  $9.971 billion, while $78 million was generated by Layer2 scaling projects Arbitrum, Polygon, and Optimism in total. 

Coinbase says Ethereum transitions to PoS consensus mechanism may hurt ETH price 1
Source: Coinbase

The research noted that once Ethereum will shift to PoS consensus then other Layer2 scaling solution networks will reduce the staking reward & which could increase the size of the ETH liquid circulating supply & it will further impact the price of Ethereum.

Coinbase research explained:

“If more user activity migrates to L2s and those L2s require their tokens to facilitate transactions, that could potentially reduce the staking yields to validators who will earn less on those net transaction fees. If that discourages staking on the platform, that could increase the size of the ETH liquid circulating supply, possibly hurting ETH prices.”

Perhaps, the researchers noted that Layer2 scaling solution networks will only give an advantage to the Ethereum blockchain in the long term because it will only increase the activity in the Ethereum blockchain ecosystem.

Read also: Celsius Native token surges 40× despite the outage

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