Ethereum Triple Halving explained: All you need to know

The Ethereum network is completing its transition to Ethereum 2.0 and of the biggest events in the process is Triple Halving. To understand what the concept is, an understanding of Ethereum Merge is needed, click here to read about it.

So what is Ethereum Triple Halving? What exactly happens during Triple Halving? How will it affect the Ethereum ecosystem in the long run and what will it mean for investors? 

Let’s get to it.

What is Ethereum Triple Halving 

The Ethereum Triple Halving is the name given to an occurrence that will happen to the Ethereum network after it undergoes a Merge update. Once the merge is carried out successfully, the network will shift from its earlier proof-of-work to proof-of-stake consensus.

So, the Ethereum Triple Halving is a post-Merge process. That is, there are updates/occurrences that will come to play on the Ethereum network when the Merge launch becomes successful.

There are three phases of the anticipated Triple Halving that you need to take note of. They are reduced issuance, burning and staked ETH. 

With the first (reduced issuance), the amount of Ethereum issued through staking to mining in the current blockchain will decrease overall. According to former blockchain engineer Montana Wong, the net ETH issuance per year will drop from 4.3% to 0.4%. This equals an issuance of around 1500 ETH daily.

This means that the amount of ETH being sold on the network to cover mining costs daily at the moment is 15,000 but after the Merge, it is going to decrease to 1500 per day.

The second phase is burning.

Burning is a systematic reduction process that creates deflationary pressure on the Ethereum network, increasing the scarcity of ETH. An example, if you make a transaction on the Ethereum network and the gas fee is 0.01ETH, a certain fraction (in this case 0.003ETH) will be burned (eradicated) off it and removed from the total Ether supply.

Ethereum burning has been a major part of ETH since the EIP-1559 upgrade (The London Hard Fork) in August 2021 and will continue (after the Merge) to counteract some of the inflationary tendencies of ETH by burning some of the transaction fees.

Staking is the third and final phase.

Staking on the Ethereum network means ETH owners will tender their tokens to validators in order to secure the network and they will get rewards for it (about 4% APY at the moment).

As a result of the new Ethereum staking mechanics, holders will not be able to make a withdrawal of any of their staked coins until at least six months after The Merge. By implication, there will now be a defined queue for gradual withdrawal.

This will also contribute to a steady reduction of the amount of ETH in circulation. 

One of the other cryptocurrencies that have undergone a similar process to the Ethereum Triple Halving is the flagship asset, Bitcoin. Although Bitcoin’s halving happens every four years (in contrast to Ethereum which is about to be a once-in-a-lifetime phenomenon).

To note, Bitcoin’s Halving is similar to the Burning process in the case of Ethereum. Both processes will cause an increase in value.

The most recent Bitcoin halving was on May 11, 2020, when BTC rewards decreased from 12.5 BTC to 6.25 BTC. On that day, the price of Bitcoin was $8,800. Over the next six months, it nearly doubled in price.  Now, the price of 1 BTC is trading above $23,000.

Effects of the Triple Halving 

According to expert predictions, since BTC has mostly reacted positively to halving, it is also likely that Ethereum value will also surge instantly, given the two are quite closely related.

The Ethereum Merge announcement has already impacted the price of ETH as it is already rallying ahead of the event slated tentatively for September 15. 

Now, one of the most intensively discussed topics in the crypto industry is how far the Triple Halving will drive up the price of ETH. Speculations suggest that both The Merge and the Triple Halving could push ETH market price, as the overall supply will see an increase in scarcity compared to the current rate.

BitMEX’s founder Arthur Hayes predicts that Ethereum is gearing up for an intense price rally that would enable the token to reach the long-awaited $5,000 mark. 

However, this and other predictions remain mere speculation. We will have to wait till after the launch on September 15 to see what plays out.