Key Takeaways

  • Ethereum completed The Merge in September 2022, transitioning from Proof of Work to Proof of Stake, reducing energy consumption by over 99%.

  • The upgrade eliminated mining rewards and reduced new ETH issuance from approximately 13,000 ETH/day to roughly 1,700 ETH/day, fundamentally changing the token's supply dynamics.

  •  Post-Merge upgrades (Dencun, Pectra, Fusaka) have focused on scaling via rollups and data availability.

Introduction

Since its launch in 2015, Ethereum has become a leading platform for decentralized applications, enabling thousands of projects built on smart contracts. However, as adoption grew, Ethereum's original infrastructure struggled to scale efficiently, resulting in high fees and network congestion during periods of heavy demand.

To address these limitations, the Ethereum community proposed a series of major upgrades aimed at improving scalability, security, and sustainability. The most significant of these was The Merge, which replaced the energy-intensive mining process with a staking-based consensus system. This article explains what The Merge accomplished, how it changed Ethereum's economics, and what has happened since.

Why Is Ethereum Upgrading?

Blockchains are typically designed around the principle of decentralization rather than relying on a central authority. The benefits include permissionless access, trustless operation, and resistance to single points of failure. However, achieving security and scalability while preserving decentralization is challenging, a problem often described as the consensus algorithm trilemma (also known as the scalability trilemma).

Under its original Proof of Work system, Ethereum could process roughly 15-30 transactions per second. Blocks had to be mined at a constant rate, and transaction capacity per block was limited. During periods of high demand, this created severe congestion and drove gas fees to levels that priced out many users.

To overcome these constraints, Ethereum began transitioning to Proof of Stake and outlined a long-term roadmap of upgrades: the Beacon Chain, The Merge, The Surge, The Verge, The Purge, and The Splurge. Each phase addresses different aspects of Ethereum's performance and functionality.

The Beacon Chain

Launched on December 1, 2020, the Beacon Chain introduced Proof of Stake to Ethereum as a parallel chain running alongside the original mainnet. It allowed users to begin staking ETH and participating as validators to secure the network. The Beacon Chain served as a testing ground for the PoS consensus mechanism before it took over responsibility for the entire network.

The Merge

Completed on September 15, 2022, The Merge was a pivotal upgrade that unified Ethereum's execution layer (the original mainnet) with the consensus layer (the Beacon Chain). After The Merge, Ethereum no longer relied on mining. Instead, blocks are proposed and validated by staking participants (validators) who are randomly selected to add new blocks. Validators earn rewards through staking yields and transaction tips.

The transition reduced Ethereum's energy consumption by over 99%, as validating blocks through staking requires a small fraction of the computational power that mining demanded. All transaction history remained intact, and no action was required from users during the upgrade.

ETH Supply Dynamics After The Merge

The Merge fundamentally altered Ethereum's tokenomics by eliminating mining rewards. Under PoW, approximately 13,000 ETH was issued per day. Post-Merge, new issuance dropped to roughly 1,700 ETH per day in validator rewards.

Combined with the EIP-1559 base fee burn mechanism (introduced in August 2021), which permanently removes ETH from circulation with every transaction, this created the potential for deflationary periods. Over 4.6 million ETH has been burned since EIP-1559 launched.

However, after the Dencun upgrade in March 2024 introduced blob transactions that dramatically reduced gas fees for Layer 2 rollups, the daily burn rate fell significantly. As of early 2026, Ethereum's net annual inflation stands at approximately 0.23%, meaning the network is slightly inflationary overall but can flip deflationary during periods of high L1 activity when base fees consistently exceed roughly 16 gwei.

The current supply sits at approximately 120.7 million ETH, only marginally higher than the approximately 120.5 million at the time of The Merge. This represents a stark contrast to pre-Merge issuance rates of 4-5% annually.

Staking After The Merge

Following the Shanghai/Capella upgrade in March 2023, which enabled withdrawals of staked ETH, the staking ecosystem matured substantially. As of early 2026, over 36 million ETH (approximately 30% of total supply) is locked in staking contracts, earning validators an annual yield of roughly 3-5% from consensus rewards and priority tips.

This large portion of staked supply effectively reduces the freely circulating ETH, contributing to tighter market dynamics even as total supply grows modestly. Liquid staking protocols and restaking platforms have further expanded participation by allowing stakers to maintain liquidity while their ETH secures the network.

What Came After The Merge?

Dencun and proto-danksharding (March 2024)

The Dencun upgrade introduced EIP-4844 (proto-danksharding), which created a new transaction type called "blobs" optimized for Layer 2 scaling solutions to post large volumes of data more efficiently. This reduced L2 transaction costs by 90-99% on many rollups, making Ethereum-based scaling accessible to far more users and applications.

Pectra (May 2025)

The Pectra upgrade continued optimizing blob usage and data availability for rollups. It refined gas pricing for data (calldata versus blobs) and introduced early groundwork for account abstraction, improving fee predictability for Layer 2 operators and reinforcing Ethereum's rollup-centric scaling strategy.

Fusaka (late 2025)

Fusaka further expanded rollup integration and efficiency, including EIP-7918 which established a minimum blob fee floor. This ensures that even during periods of low blob demand, rollup transactions still contribute to ETH burn, addressing the near-zero burn issue that emerged after Dencun.

Glamsterdam (2026)

The Glamsterdam upgrade represents Ethereum's most ambitious change since The Merge. Key features include enshrined Proposer-Builder Separation (ePBS) to make block construction transparent and protocol-enforced, Block-Level Access Lists enabling parallel transaction execution, and gas repricing expected to reduce L1 fees by approximately 78%. The target throughput reaches up to 10,000 transactions per second on mainnet, with gas limits increasing from current levels toward 100-200 million gas per block.

The Broader Roadmap

  • The Verge aims to make nodes lighter and easier to run using Verkle Trees, a data structure that simplifies blockchain verification. This could allow more individuals to run validator nodes on modest hardware, broadening decentralization.

  • The Purge focuses on removing old historical data that nodes must store, reducing storage requirements and simplifying the protocol for operators.

  • The Splurge covers smaller improvements that fine-tune performance, developer tooling, and user experience without fitting neatly into the other categories.

These phases do not have fixed timelines but collectively aim to make Ethereum faster, more efficient, and more accessible to run.

FAQ

Did The Merge reduce Ethereum gas fees?

No. The Merge changed the consensus mechanism from Proof of Work to Proof of Stake but did not directly reduce gas fees. Fee reductions came later through separate upgrades, particularly Dencun (EIP-4844) in March 2024, which cut Layer 2 rollup costs by 90-99% by introducing blob transactions for data availability.

Is Ethereum deflationary after The Merge?

Ethereum is not consistently deflationary. As of early 2026, the network has a net annual inflation rate of approximately 0.23%. However, during periods of high network activity when base fees exceed roughly 16 gwei on average, the burn rate can surpass issuance, making ETH temporarily deflationary. The narrative has shifted from "always deflationary" to "low-inflation asset that turns deflationary during high demand."

What happened to Ethereum miners after The Merge?

When Ethereum transitioned to Proof of Stake, mining was permanently eliminated from the network. Former Ethereum miners either redirected their hardware to other Proof of Work blockchains, repurposed equipment for AI and high-performance computing workloads, or sold their hardware. The network's block validation is now handled entirely by validators who stake ETH.

How much ETH do you need to become a validator?

Running a solo validator requires 32 ETH. However, users with smaller amounts can participate through liquid staking protocols or pooled staking services that allow fractional contributions while still earning staking rewards.

Closing Thoughts

The Merge marked a transformative moment for Ethereum, shifting the network from an energy-intensive mining model to a Proof of Stake system that fundamentally altered its economics.

Further Reading

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