The Ethereum Merge is one of the most powerful catalysts in crypto history, and it is quickly approaching. As we reach the endgame for ETH under the proof of work regime, let’s address 10 important characteristics of ETH-Merge, proof of stake ETH.
1. Post Merge, ETH L1 fees will NOT come down
The purpose of the Merge is to deprecate Ethereum’s PoW consensus mechanism and replace it with PoS. Fees are a function of blockspace demand, NOT consensus mechanism. For lower fees, use the L2s (already live) for execution.
2. For a 6-12 month window post Merge, there will be no structural sell pressure from ETH issuance
Staked ETH and issuance/block rewards to validators cannot be withdrawn until withdrawals are enabled. However, fee tips (basefee is burned) and MEV can be withdrawn.
3. ETH inflation drops from 4.3% to 0.22% post Merge
If we assume 500,000 ETH annual fees, daily ETH issuance drops from 14,250 ETH / day to 736 ETH / day post Merge. That is a 95% reduction in issuance – meaning 95% less ETH that can be sold daily (post withdrawals).
4. ETH under PoS will have better security (higher cost to attack the chain) than ETH under PoW
This has been debated to death – but ETH under PoS mathematically costs more to attack than ETH under PoW.
describes it best HERE.
5. Due to EIP-1559's fee burn, ETH has a deflationary monetary policy in *most* scenarios
Since a picture is a thousand words and tweets are limited – see issuance scenarios below: In short, even with 100mm ETH staked and 0 fees, ETH inflation is only 1.51%.
6. Post Merge, ETH staking yield increases by 50% (conservatively)
The current ETH staking yield is 4.2%. Post Merge, with the inclusion of transaction fees (fee tips) and MEV going to validators, staking yield jumps to 6%+ See staking yield scenarios below:
7. After the Merge, ETH will complement BTC's use cases as pristine collateral and a store of value
BTC has cemented its narrative as “digital gold” – and that’s great ETH’s will be both a “digital bond” (staking yield = risk free rate) and DeFi’s main collateral asset
8. Post Merge, the Ethereum blockchain will be more sustainable than the Bitcoin blockchain
In addition to PoS being more energy efficient than PoW (99% less electricity usage), Ethereum also costs less. explains this articulately .
9. ETH scaling is here!
10. Post Merge, #Ethereum's journey will not be over
Although L1 ETH will greatly ossify after the Merge, technology needs to continue evolving Data sharding, light clients, staking withdrawals, state mgmt, and more – all coming. From Vitalik:
