Share this article
The Merge May Negatively Impact DeFi Protocols, Stablecoins: Report
The transition to proof-of-stake could decrease stablecoin values and shrink lending pools, according to DappRadar.
Updated Apr 9, 2024, 11:35 p.m. Published Aug 26, 2022, 7:48 p.m.
Ethereum’s upcoming Merge could significantly impact the way DeFi protocols operate atop crypto’s most popular decentralized finance chain, according to a new DappRadar report published Friday.
The study focuses on delays that could arise during Ethereum’s transition to a proof-of-stake consensus mechanism, better known as the Merge. The long-awaited (and often delayed) tech upgrade may slow transaction times or create service disruptions across DeFi lending protocols, creating headaches for the platforms, the report said. In turn, this could plunge stablecoin values and shrink DeFi lending pools.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
Ethereum is host to an ecosystem of decentralized token trading, lending and yield-farming projects that together process billions of dollars in crypto value daily. Those DeFi protocols rely on Ethereum’s consensus mechanism to function properly for their own services to work.
Read more: Ether May Continue to Lose Momentum Until Merge Is Completed, BofA Says
Pedro Herrera, a data analyst at DappRadar, says the Merge’s negative effect on ether market supply could affect DeFi liquidity pools, even if the transition goes off without a hitch.
“If the Merge fails to successfully be launched, we will have delays on DeFi protocols that will affect stablecoins,” Herrera told CoinDesk. “But from the supply dynamics perspective, this can also take a toll on how stablecoins will be used for liquidity pools, in the DeFi space and beyond.”
Ethereum's transition to a proof-of-stake consensus mechanism is expected to slow the rate at which new tokens are issued – particularly in the months immediately following the switch. As token issuance slows, the blockchain’s token-burning mechanism will continue removing ether from circulation at the same rate as before the Merge. Over time, this could decrease ether’s total market supply.
Read more: What Is Proof-of-Stake?
It is also possible that DeFi platforms could experience network downtime as some Ethereum-based protocols lag behind the Ethereum chain in their transitions to the proof-of-stake consensus mechanism, the report said.
“There is the risk that the Merge will result in technical difficulties such as a timestamp desynchronization between nodes or other technical issues that prevent the proof-of-stake to be in sync after the Merge,” said Herrera. “This could force Ethereum to pause block production or even halt [production] temporarily as their developers work on the issue.”
Even so, platforms themselves have projected confidence that the Merge will not impact their functionality. Uniswap, a popular trading hub, said its services “will continue to work seamlessly” throughout the upgrade.
Earlier this week, the Ethereum Foundation released an official timeline and framework for the completion of the Merge. On Sept. 6, the Bellatrix upgrade, which kicks off the official transition to a proof-of-stake consensus mechanism, will activate on the Beacon Chain.
Read more: What Is the Ethereum Merge?
More For You
What to know:
- As of October 2025, GoPlus has generated $4.7M in total revenue across its product lines. The GoPlus App is the primary revenue driver, contributing $2.5M (approx. 53%), followed by the SafeToken Protocol at $1.7M.
- GoPlus Intelligence's Token Security API averaged 717 million monthly calls year-to-date in 2025 , with a peak of nearly 1 billion calls in February 2025. Total blockchain-level requests, including transaction simulations, averaged an additional 350 million per month.
- Since its January 2025 launch , the $GPS token has registered over $5B in total spot volume and $10B in derivatives volume in 2025. Monthly spot volume peaked in March 2025 at over $1.1B , while derivatives volume peaked the same month at over $4B.
More For You
Turkey's Paribu Buys CoinMENA in $240M Deal, Expanding Into High-Growth Crypto Markets
With the acquisition, Paribu gains regulatory foothold in Bahrain and Dubai and access to the region's fast-growing crypto user base.
What to know:
- Paribu acquires Bahrain- and Dubai-based CoinMENA for up to $240 million.
- Deal marks Turkey’s biggest fintech acquisition and first international crypto M&A, the firm said.
- The move taps into the MENA region’s fast-growing crypto user base and supportive regulatory hubs.
Top Stories
