Author: David Hoffman
Original Source: Bankless Newsletter
Compiled By: 0x711, 0x214
The Merge remains one of the most pivotal events in cryptocurrency history. Let’s break it down comprehensively.
1. What Is "The Merge"?
"The Merge" refers to Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). It merges the Ethereum mainnet with the Beacon Chain—a dedicated PoS blockchain launched in December 2020.
👉 Why is the Beacon Chain crucial?
Key points:
- Beacon Chain ran "empty" (no transactions) to test PoS.
- Post-merge, PoW validation is replaced by PoS.
2. Why Is The Merge So Significant?
- First major consensus shift in an established blockchain economy.
- ETH’s $203B market cap hinges on seamless transition.
- Risks: A failure could disrupt billions in DeFi/NFT activity.
3. Impact on ETH Economics
Reduced ETH Issuance
- Annual inflation drops from 4.3% to 0.43%.
- PoS eliminates miner sell pressure (90%+ reduction in new ETH).
ETH as a Yield Asset
- Stakers earn ~5% APY (up from 4.2%) via transaction fees.
👉 Calculate post-merge ETH issuance
4. Will ETH Become Deflationary?
Yes, when:
- Gas fees ≥ 7 gwei: Burn rate exceeds issuance.
- Bull markets (e.g., 200+ gwei) accelerate deflation.
5. Will Merge Lower Gas Fees?
No.
- Misconception conflates Merge with sharding (future upgrade).
- Solution: Layer-2s (e.g., Arbitrum, Optimism) handle low-cost transactions.
6. Transaction Speed Improvements
- Block time speeds up 13.6s → 12s.
- 12% more capacity, but negligible for end-users.
7. Energy Efficiency
- 99.95% reduction in energy use vs. PoW.
- Ethereum becomes one of the greenest financial systems.
8. Will Stakers Sell ETH Post-Merge?
- Withdrawals locked for 6–12 months post-merge.
- Daily unstaking limit: 43,200 ETH (1,350 validators × 32 ETH).
9. Why 32 ETH per Validator?
- Balance between decentralization and scalability.
- Based on 2⁵ (32) for optimal finality epochs.
10. PoS ≠ On-Chain Governance
- Validators secure the chain (like PoW miners).
- No governance power—decisions remain with node operators/community.
FAQs
Q1: When will the Merge happen?
A: Expected in 2025 (no delays announced).
Q2: Can I stake ETH after the Merge?
A: Yes, but withdrawals unlock 6–12 months later.
Q3: Will ETH 2.0 replace Ethereum?
A: "ETH 2.0" is deprecated—think of it as Ethereum’s PoS upgrade.
Q4: How does PoS enhance security?
A: Lower costs + attack penalties (slashing) deter bad actors.
TL;DR: The Merge reshapes ETH’s economics, security, and sustainability—without altering L1 scalability.