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Ethereum Merge Guide

Ethereum Merge Guide

Dylan Matthews
Fact Checked
Aug 30, 2022

The Ethereum Merge is the most important network transition in crypto-economic history. If you are looking for a quick summary, the three points below highlight the key ways in which the ETH Merge will improve the protocol.

  • The ETH Merge will transition the network from Proof of Work (PoW) to Proof of Stake (PoS).
  • The ETH Merge will reduce sell pressure by $60 million (90%) per day, which was previously paid out to PoW miners to validate the network.
  • The Merge will reduce energy consumption by 99.95% making the network ESG friendly.

Table of Contents

Platform Highlights

  • Largest Smart Contract Platform by Market Cap.
  • Most Value Locked in DeFi with $34.4B on-chain.
  • Safest and most Decentralized Layer 1 network.

What is the Ethereum Merge?

The Ethereum Merge is the official hard fork of the Ethereum Network that transitions the execution layer from Proof of Work to Proof of Stake. The main benefits of this transition are that it significantly cuts protocol inflation because the network does not have to pay PoW miners to validate transactions.

Instead, the transaction validation will be completed by stakers who deposit 32ETH to a staking contract or a third-party staking service provider like Lido or Rocket Pool. The ETH Merge will reduce the sell pressure of ETH tokens by over $60 million per day and will cut energy consumption by 99.95%

Ethereum Merge transition visualized - ETH Foundation.

What is the Official Date for the Merge?

The Ethereum Foundation announced on the previous Core Devs Call that they expect the Ethereum transition to take place on September 14 or September 15 in 2022. The date could change slightly depending on how fast blocks on the network get proposed over the next few weeks. The official block that will transition ETH from PoW to PoS is block number 58750000000000000000000.

Will the Ethereum Merge Affect Price?

In Ethereum's current state (Proof of Work) the network inflation rate is around 4.1% per year according to leading data provider ultrasound.money. Post-merge, the network inflation rate will drop substantially to 0.1% (even at current gas prices which are incredibly low).

This results in a 90% reduction of sell pressure, which dramatically changes the structural flows for Ethereum. Many investors have argued that this event will make ETH more sound as a money than its predecessor Bitcoin (BTC).

Network inflation rate post-merge via Ultrasound.money.

What do I need to do to get Ready?

Fortunately for Ethereum (ETH) investors, you will not need to do anything to your tokens to be involved in this transition from PoW to PoS. All funds held in your on-chain wallet (for example MetaMask or Ledger) will remain intact after the transition and will be valued the same. This includes other DeFi tokens, stablecoins, NFTs and other Ethereum Virtual Machine-related assets.

Ethereum Merge - Final Thoughts

Overall, the Ethereum Merge is the most important crypto-economic event in the brief history of digital assets. We have never seen a network with over $10 billion in value-locked transition from one consensus mechanism to another, while in production. If successful, our team does not doubt that this event will be considered historic and of more significance than Bitcoin halvings.

Dylan Matthews

I am the Founder & CEO of Buy Bitcoin Bank and was previously an engineer for a Prop trading firm in Crypto.

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