Ethereum’s Transition

The completion of the Merge marks Ethereum’s shift from a proof-of-work to a proof-of-stake consensus model for verifying blockchain transactions. This change has led to a significant reduction in energy consumption and an improvement in blockchain security. Energy usage has decreased by 99.99%, with PoS validators now only needing to stake 32 ETH. This reduces the risk of a 51% attack when compared to the previous PoW system.

There were high hopes that the Merge would solve Ethereum’s challenges with gas fees and transaction speeds by improving both factors. However, the average user has yet to notice substantial changes. It’s expected that more noticeable improvements will come after the network introduces sharding, a mechanism scheduled to be implemented six months following the Merge.

Changes in Costs and Speed After the Ethereum Merge

Below, we explore some of the changes that have already been observed and those expected to solidify as the transition to proof-of-stake continues.

Changes in Transaction Speed

The changes in Ethereum’s block transaction times are too small for the average user to notice right away. However, the transaction rate has improved: it now takes only 12 seconds to validate a block after the switch to proof-of-stake, compared to 13-14 seconds under the proof-of-work system. During CryptoChipy’ testing, some transactions were even completed more quickly during off-peak times.

Changes in Transfer Costs

The Merge, which occurred on September 15, went smoothly, and one of the immediate effects was a sharp drop in transfer costs on the Ethereum network. Shortly after the Merge, Ethereum’s transfer costs were drastically lower. To give an example, high-priority transactions in mid-May cost up to 68 gwei, which was around $2.97 per transaction. About ten days after the Merge, high-priority transactions saw a 93% reduction, dropping to 8 gwei, or $0.18.

Data from CryptoChipy shows a similar drop in average Ethereum fees since the Merge. On May 13, the average fee was $1.37, but it has since decreased to around $0.58 per transaction, marking a reduction of over 57%.

The Merge also had an impact on the broader ecosystem. For instance, gas tracker data shows that an Opensea Sale now costs about $0.61, compared to around $28.58 in May. Similarly, a Uniswap decentralized exchange swap cost about $1.58 post-Merge, down from $26.07 in May.

Transfers of ERC20 tokens have seen similar reductions in costs. Sending ERC20 tokens like USDC now costs about $0.46 per transaction, compared to $7.65 earlier this year.

The Merge has laid the groundwork for future solutions to challenges such as high fees and network congestion. Transaction costs have decreased by about 80-90%, making the network faster and more affordable.

Overall Effect of the Ethereum Merge

Various factors influence ETH’s price, and the switch to PoS is expected to reduce the amount of ETH issued per block by around 80%. This will result in more efficient and cheaper transactions, which could drive greater demand across the Ethereum network. The substantial drop in energy consumption has been a positive outcome for investors and the public, particularly those concerned about the environmental impact of the PoW consensus mechanism.

The Merge could have a positive effect on ETH’s value, especially amid ongoing global economic uncertainty. ETH prices might still see increases in the coming days, but volatility will likely remain a constant factor.

With the transition to a less energy-intensive technology, some speculate that crypto investments could surge past $10,000, while others remain more bearish. The future remains uncertain, as many are waiting to see how investors and developers building on Ethereum’s platform will react to these changes.

How Are Things Shaping Up in October?

Global geopolitical events affecting inflation, stock markets, cryptocurrencies, and currencies in general have impacted ETH as well. Overall, ETH has seen a decline in line with other asset classes. We are currently in a bearish market, but many analysts predict a potential recovery by the end of Q4 or Q1 2023. This is typical of the broader economic landscape.

Blockchain and crypto companies are focusing on building their services to ensure they are robust and secure when the market sentiment shifts back toward bullish conditions.