Ethereum’s historic Merge may change the way its native token, ether (ETH), is used, according to Lex Sokolin, head economist of decentralized protocols at software company ConsenSys.
“A fairly large portion of people are going to be staking their ETH in the protocol to secure the protocol,” Sokolin told CoinDesk TV’s “First Mover,” on Monday. “Which in a sense, is going to inevitably turn at least some ETH into a store of value inside of the network.”
Ethereum is expected to transition from a proof-of-work (PoW) to a quicker and less energy consuming protocol known as proof-of-stake (PoS) in a matter of days.
Sokolin, who focuses on areas of decentralized finance and autonomous organizations (DAOs), said Ethereum’s use as collateral in DeFi suggests there are those who are “certainly supportive of ETH as a store of value, ultrasound money type asset.”
Sokolin added that ETH is not only “being used to power the protocol,” but it is also oftentimes being used as “a unit of account for all sorts of goods and NFTs inside of Web 3.” NFTs are known as non-fungible tokens and give collectors ownership of the digital items they’ve bought into.
“It has both of those functions,” Sokolin said. “The sound money function as well as the store of value function.”
In the short term, Sokolin predicts the growth rate of ETH will be higher than bitcoin.
“The thing I would be excited about in regards to Bitcoin would be to see more Bitcoin incorporated into Web 3, likely through bridging or rapping,” Sokolin said. “And if it could be used as collateral inside of Web 3, that would be even more powerful.”