The Ethereum merger is one of the most powerful catalysts in crypto history, and its arrival is fast approaching.
As Ethereum moves towards the end of the proof-of-work (PoW) mechanism, it’s important to understand 10 important features of Ethereum’s post-merger PoS era:
1. ETH L1 fees will not drop after the merger
The purpose of The Merge is to abandon Ethereum’s PoW consensus mechanism and replace it with PoS. Fees are a function of block space requirements, not a consensus mechanism. For lower fees, use L2 (live) to execute transactions.
2. There will be no structural selling pressure from ETH issuance in the post-merger 6-12 month window
Users will not be able to withdraw staked ETH and issue/block rewards to validators until Ethereum 2.0 stake withdrawals are enabled. However, fee tips (basefee is burned) and MEV can be withdrawn.
3. Post-merger ETH inflation drops from 4.3% to 0.22%
If we assume an annual fee of 500,000 ETH, the combined daily ETH issuance will drop from 14,250 ETH/day to 736 ETH/day. 95% reduction in issuance – this means 95% less ETH can be sold per day (after opening staking withdrawals)
4. ETH under PoS will have better security than ETH under PoW (the cost of attacking the chain is higher)
This topic will be debated to death – but mathematically, ETH under PoS is more expensive to attack than ETH under PoW. Vitalik Buterin described it best in the article “Why PoS?”:
5. ETH has a deflationary monetary policy in most scenarios due to EIP-1559 fee burn
See the ETH issuance scenario below:
In short, even with 100 million ETH staked and 0 fees, the ETH inflation rate is only 1.51%
6. After the merger, the ETH pledge yield will increase by 50% (conservative estimate)
The current ETH staking yield is 4.2%. After the merger, including transaction fees (fees tipping) and MEV entering validators, the staking yield will jump to over 6%
See the Staking Yield Scenario below:
7. After the merger, ETH will complement BTC ‘s use case as original collateral and store of value
BTC solidifies its narrative as “digital gold” – which is great.
ETH will be both a “digital bond” (staking yield = risk-free interest rate) and the main collateral asset for DeFi.
8. After the merger, 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 is also less expensive.
@ryanberckmans explained this clearly:
9. ETH expansion is coming!
The merger swapped ETH’s consensus engine for PoS for increased security. A secure L1 facilitates the development of L2 Rollup.
The expansion of @0xPolygon, @arbitrum, @optimismPBC, @StarkWareLtd, @zksync and more is going full steam ahead.
10. Ethereum’s upgrade journey won’t end after the merger
Although the technical specifications of L1 Ethereum will be greatly rigid after the merger, the technology needs to continue to evolve.
Data sharding, light clients, staking withdrawals, state management, and more – coming soon. In the words of God:
To repeat: The Ethereum merger is one of the most impressive engineering feats in blockchain history.
Under a full PoS system, Ethereum will have the economic structure to improve security, scale through L2, develop its DeFi and NFT platforms, and surpass Bitcoin.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/10-things-you-should-know-after-the-ethereum-merger/
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