With all eyes on Ethereum’s Merge upgrade in the cryptocurrency market, DappRadar evaluated Merge’s potential impact on DeFi protocols and stablecoins.
DappRadar recently published a report, noting that Ethereum’s upcoming Merge rise could significantly impact the way DeFi protocols and stablecoins work.
DeFi Protocols and Stabelcoins May Be Affected by Merge
The Ethereum network will transition to Proof of Stake (PoS) with the upcoming Merge upgrade. DappRadar’s latest work focuses on the delays that may occur during this transition. He says the long-awaited upgrade could slow down processing times. This can cause service interruptions in DeFi credit protocols. On the other hand, it can also devalue stablecoins and shrink DeFi loan pools.
Pedro Herrera, one of DappRadar’s data analysts, says that even if the transition is smooth, DeFi liquidity pools can be affected by this.
Noting the situation where Merge was not launched successfully, Herrera said, “In this case, we will experience delays in DeFi protocols that will affect stablecoins. But in terms of supply dynamics, this can also affect how stablecoins are used.”
It is expected that the speed of issuing new tokens will decrease immediately after Merge. As token issuance slows, the blockchain’s token burning mechanism will continue to circulate ETH at the same rate as before Merge. This, in turn, could reduce the overall market supply of ETH.
The Ethereum Foundation has released an official timeline for Merge. Accordingly, on September 6, the start of the transition will be with the Bellatrix upgrade.
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