Ethereum's Upgrade Progress Reaches Midpoint
On July 7, Ethereum successfully conducted its second major test for The Merge — the network's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This critical rehearsal occurred on the Sepolia testnet, bringing Ethereum closer to its final upgrade. With two test phases completed, only one rehearsal remains on the Goerli testnet before the official merge.
Although no exact timeline exists for the full transition, Ethereum founder Vitalik Buterin and core developers have consistently indicated a 2022 completion. This upgrade represents Ethereum’s three-phase evolution toward "Ethereum 2.0", prioritizing scalability, sustainability, and security:
- Beacon Chain Launch (December 2020) – Introduced PoS consensus, allowing users to stake ETH and become validators.
- The Merge – Integrates the current Ethereum mainnet with the Beacon Chain, terminating PoW mining.
- Shard Chains – Implements parallel processing chains to drastically improve throughput.
👉 Explore how Ethereum’s upgrade impacts ETH valuation
Key Metrics Post-Sepolia Test
- 405,782 active validators (as of July 7)
- 12.94 million ETH staked (10.5% of circulating supply)
- All-time high staking participation despite recent dip in daily deposits
Declining Daily ETH Staking: Causes and Implications
While total staked ETH continues rising, daily deposits have fallen significantly since May 2022 — from a peak of 121,648 ETH (May 2) to as low as 32 ETH on multiple occasions. This trend invites two interpretations:
- Market Uncertainty: Bearish conditions discourage new stakers due to ETH’s price volatility and locked-up liquidity until post-merge.
- Validator Saturation: Existing stakers dominate rewards, reducing incentives for new participants.
ETH’s Deflationary Mechanisms
Ethereum’s upgrade incorporates two supply-reducing models to counter inflation:
- EIP-1559: Burns base transaction fees (~2.51 million ETH burned to date).
- PoS Transition: Cuts new ETH issuance by ~90% compared to PoW.
However, analysts caution against expecting a "BTC halving-style" price surge. User sentiment remains divided, with some stakers adopting a wait-and-see approach amid merger risks.
Liquid Staking Platforms: Unlocking Flexibility
To address staking’s liquidity challenges, platforms like Lido Finance, Rocket Pool, and StakeWise offer solutions:
| Platform | Minimum ETH | Key Feature | Risk Mitigation |
|---|---|---|---|
| Lido Finance | Any amount | Issues stETH (tradeable derivative) | DAO-curated node operators |
| Rocket Pool | 0.01+ ETH | Decentralized mini-pools (16 ETH) | RPL token collateral |
| StakeWise | Any amount | Dual tokens (sETH2 + rETH2) | Institutional partnerships |
👉 Compare liquid staking yields across platforms
FAQ: Ethereum Merge Essentials
Q1: When will Ethereum’s merge happen?
A: Expected Q3/Q4 2022, pending final Goerli testnet success.
Q2: Can I unstake ETH after the merge?
A: Yes — withdrawals unlock post-merge via Shanghai upgrade.
Q3: Will transaction fees drop post-merge?
A: Not immediately; sharding (Phase 3) targets fee reduction.
Q4: How does PoS improve scalability?
A: PoS validators process transactions faster than PoW miners, enabling future shard chains.
Strategic Takeaways for Users
- Staking Rewards: Current APR ~4.2% (varies by platform).
- Liquid Staking: Use derivatives (e.g., stETH) in DeFi for compounded yields.
- Post-Merge Opportunities: Monitor validator decentralization and sharding developments.
Disclaimer: Staking involves market and smart contract risks. Audit platforms before depositing ETH.