The Ethereum Merge: What Actually Changed?

September 15, 2022. The day Ethereum switched from Proof of Work to Proof of Stake. The most anticipated event in crypto history. The "Merge" that was supposed to change everything.

18 months later, I wanted to look back and see what actually changed vs what we all expected. Because honestly? Most of the predictions were wrong.

What We Expected

Leading up to the Merge, the crypto community had some pretty specific expectations:

• "ETH will become deflationary" - Burning fees + lower issuance = number go up
• "Gas fees will drop significantly" - More efficient consensus = cheaper transactions
• "Ethereum will be much faster" - PoS is faster than PoW, right?
• "ESG concerns will disappear" - 99% less energy usage
• "Price will moon immediately" - Buy the rumor, sell the news... or was it the other way?

I'll be honest - I believed most of these. I was staking ETH and expecting big things. Reality had other plans.

What Actually Happened

1. ETH Supply (The Biggest Surprise)

This one actually worked out better than expected. ETH has been deflationary for most periods since the Merge. The combination of EIP-1559 fee burning and reduced issuance has been removing ETH from circulation.

But here's the thing - it only works when network activity is high. During quiet periods, ETH is still slightly inflationary. It's not the guaranteed deflation machine people thought it would be.

2. Gas Fees (The Big Disappointment)

Gas fees didn't drop. At all. They're still expensive during busy periods. Why? Because the Merge didn't change Ethereum's throughput - it just changed how consensus works.

This was probably the biggest misconception. PoS doesn't magically make transactions cheaper. You need scaling solutions for that (which are finally starting to work with L2s).

3. Transaction Speed (Also Unchanged)

Ethereum blocks still come every ~12 seconds, just like before. PoS didn't make it faster. The Merge was about consensus mechanism, not throughput.

Again, this was a common misconception. Speed improvements come from sharding and L2s, not from switching to PoS.

4. Environmental Impact (Actually Delivered)

This one worked exactly as advertised. Ethereum's energy consumption dropped by ~99.9%. It went from using as much electricity as a small country to using about as much as a large office building.

This was huge for institutional adoption. ESG-conscious investors could finally buy ETH without worrying about environmental impact.

5. Price Action (Classic Crypto)

ETH pumped leading up to the Merge, then dumped immediately after. Classic "buy the rumor, sell the news." It went from ~$1,700 pre-Merge to ~$1,200 a few weeks later.

But over the longer term, ETH has performed well. It's up significantly from pre-Merge levels as I write this in March 2024.

The Unexpected Consequences

Some things happened that nobody really predicted:

Staking Became Mainstream

Over 30% of all ETH is now staked. That's about $120 billion locked up earning yield. This has created a new class of "productive" crypto assets.

I've been staking since the Beacon Chain launched, and it's been great. Steady 4-5% returns with no additional risk (assuming you trust Ethereum's future).

Centralization Concerns

About 60% of staked ETH is controlled by just a few entities (Lido, Coinbase, Kraken). This wasn't really discussed much pre-Merge, but it's become a real concern.

If these entities collude or get regulated, they could potentially control Ethereum. That's... not great for decentralization.

MEV Became More Visible

Maximal Extractable Value (MEV) - basically, the profit from reordering transactions - became much more visible after the Merge. Validators can now capture this value directly.

This has led to some interesting dynamics around block building and transaction ordering that most users don't see but affect everyone.

My Personal Experience

I had about 10 ETH staked when the Merge happened. Here's what I noticed:

Staking rewards improved slightly. The addition of priority fees to staking rewards bumped my yield from ~4% to ~5%.

No technical issues. The Merge went incredibly smoothly from a technical perspective. Kudos to the Ethereum developers.

Portfolio impact was minimal short-term. The price dump after the Merge hurt, but I was holding long-term anyway.

Psychological impact was bigger than expected. Knowing that my ETH was earning yield made me more confident holding it through market downturns.

What It Means for Ethereum's Future

The Merge was just step one in Ethereum's roadmap. Here's what I think it enables:

Sharding becomes possible. You can't really do sharding with PoW, but PoS makes it much easier. This could actually solve the scaling problem.

Institutional adoption accelerates. The environmental concerns are gone, and staking provides yield. This is attractive to traditional finance.

Ethereum becomes more "money-like." Deflationary periods + yield from staking = Ethereum starts to look like a productive asset, not just a speculative one.

The Real Impact

Looking back, the Merge was less revolutionary and more evolutionary than people expected. It didn't solve gas fees or make Ethereum dramatically faster. But it did accomplish something important:

It proved that a major blockchain could completely change its consensus mechanism without breaking. That's actually incredible from a technical perspective.

It also set up Ethereum for the next phase of development. Sharding, L2 scaling, and other improvements are now possible in ways they weren't before.

Lessons Learned

The Merge taught me a few things about crypto investing:

Technical improvements don't always translate to immediate price gains. The market is more complex than "good news = number go up."

Expectations often exceed reality. The Merge was hyped as solving all of Ethereum's problems. It solved some and created new ones.

Long-term thinking wins. If you bought ETH for the Merge and sold after the dump, you lost money. If you held for the long-term vision, you did well.

Staking is underrated. Earning yield on your crypto holdings changes the psychology of holding through bear markets.

Looking Forward

The Merge was successful, but it was just the beginning. The real test for Ethereum is whether it can scale to handle mainstream adoption while maintaining decentralization.

L2 solutions are showing promise. Sharding is still coming. And the ecosystem continues to innovate. I'm still bullish on Ethereum long-term, but I have more realistic expectations now.

The Merge showed that Ethereum can evolve. That's probably more valuable than any short-term price pump.

This is my personal analysis, not financial advice. Ethereum is still experimental technology with significant risks.