Anticipation around the Ethereum merge is driving this token toward the key $3,500 level today

What is the "Ethereum merge," and why does it matter?

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Ethereum (CRYPTO: ETH) is the world's second-largest cryptocurrency. However, Ethereum appears to be the top token right now in terms of investor interest, as this token surges higher once again today. As of 11:50 a.m. ET, Ethereum has surged 1.5% over the past 24 hours, bringing the token to within spitting distance of a key psychological level of $3,500 per token.

Interestingly, Ethereum has been one of the more consistent winners over the past week, up 12% over the past seven days. Most of this gain appears to be attributable to the highly anticipated upcoming "Ethereum merge". Search interest for the Ethereum merge has skyrocketed of late, as investors look to understand what's going on with this foundational crypto network. 

So what

Essentially, Ethereum is undergoing a series of updates to bring a proof-of-stake consensus mechanism into place. Right now, the Ethereum network relies on a proof-of-work mechanism to validate transactions on its blockchain and secure the network. This is the highly energy-intensive process involving serious computing power to solve complex mathematical problems that many investors don't like.

Thus, this shift toward a proof-of-stake network is a big deal. The Ethereum merge will put an end to proof of work, ushering in a new staking-based consensus mechanism that environmentalists and investors alike are cheering. That's because in addition to being better for the environment, investors will be able to stake their ETH tokens and earn rewards that are estimated to be in the double-digit range, just for locking them in and participating in the consensus mechanism. 

Now what

This Ethereum merge is a multi-part upgrade, ushering in what will be Ethereum 2.0 or Eth2. It's generally expected that this update will launch sometime next quarter, with no specifics yet on the exact launch date. Accordingly, there's a lot of positive anticipation about what's on the horizon with the Ethereum network.

That said, this update isn't without risk. It's probably too early to tell whether this upgrade will go live without a hitch, and whether existing issues such as slow speeds and high costs will be "solved" with this update.

That said, investors seem to like the rhetoric around this upcoming merge, and are buying tokens en masse ahead of this upgrade. Over the coming months, I think Ethereum could be much more volatile than we've seen in the past. Accordingly, investors looking at jumping into the token at these levels should be prepared for some rather impressive moves over the near- to medium-term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Chris MacDonald owns Ethereum. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Ethereum. The Motley Fool Australia owns and has recommended Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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