For Ethereum, the Merge marked a pivotal milestone—but several more critical goals remain on its development roadmap.
Introduction
Approximately 100 days ago, Ethereum completed its historic transition to a proof-of-stake (PoS) consensus protocol. This upgrade represented Ethereum's most complex and high-risk evolution since launch, with some features still undergoing refinement. Executed on September 15, 2022, the Merge lasted about two epochs (13 minutes), during which Ethereum integrated with the Beacon Chain—a parallel PoS network launched on December 1, 2020. Post-Merge, the Beacon Chain became Ethereum's consensus layer (CL), while Ethereum's original chain transformed into the execution layer (EL), handling transaction processing without participating in finalization.
Key Impacts of the Merge
- Energy Efficiency: Ethereum's power consumption dropped by 99.99%, from 22.9 million MWh/year to just 2,600 MWh/year.
- Market Shifts: Many Ethereum miners redirected hash power to chains like Ethereum Classic (ETC) and Ravencoin, though some transitioned to cloud services like CoreWeave.
Ethereum Network Metrics
1. ETH Issuance & Burn Rate
- Daily ETH issuance plunged from ~15,000 ETH to <1,800 ETH.
- Annualized inflation stabilized at 0.12% (down from 4–5% pre-Merge).
2. Block Time Consistency
- Average block time decreased from ~14 seconds to 12 seconds.
- Daily confirmed blocks rose from ~6,000 to 7,000+, enhancing transaction throughput.
3. Block Miss Rates & Attestation Efficiency
- Post-Merge, missed block rates fell 36.7% due to MEV incentives.
- Attestation miss rates slightly increased with validator growth.
MEV Ecosystem Developments
4. MEV-Boost Adoption
- 80% of validators now use MEV-Boost to access competitive block-building markets.
- Flashbots' relay dominance dropped from 60% to <30%, with new permissionless relays emerging.
5. MEV Earnings Volatility
- Daily MEV revenue remained stable despite infrastructure shifts, averaging 200–400 ETH/day.
- Spikes occurred during market turmoil (e.g., FTX collapse in November 2022).
6. Censorship Concerns
- 57% of blocks were built by relays filtering OFAC-sanctioned addresses.
- Decentralized builders like bloXroute now counterbalance censorship risks.
Validator Dynamics
7. Staking Rewards
- Annual yields rose modestly to 5–6% (vs. pre-Merge projections of 10%+).
- EL rewards (tips/MEV) fluctuate with network activity, while CL rewards scale inversely with validator count.
8. Staking Service Dominance
- Lido controls 30% of validators; Coinbase/Kraken maintain stable shares.
- Post-Merge validator growth (+22,517) increased staked ETH by 15%.
9. Block Builder Centralization
- Over 80% of blocks are constructed by third-party entities (e.g., Flashbots, Eden).
- Validators increasingly rely on off-chain builders, raising regulatory complexity.
10. Validator Queue Limits
- With 491,461 active validators, the churn limit expanded to 7 exits/epoch (1,575 daily).
Upcoming Shanghai Upgrade
Scheduled for ~March 2023, Shanghai will enable:
- Partial withdrawals: Automated consensus-layer rewards (0.01–32 ETH) sent to EL addresses.
- Full withdrawals: Validators exit the pool after a 100-hour queue (max 16 withdrawals/block).
👉 Explore Ethereum's staking future
FAQ Section
Q: How did the Merge affect Ethereum's energy usage?
A: Ethereum’s energy consumption dropped by 99.99%, aligning with PoS’s efficiency.
Q: Can validators withdraw staked ETH now?
A: Full withdrawals require Shanghai’s activation. Partial withdrawals will be automated.
Q: Why are MEV rewards lower than expected?
A: Reduced DeFi activity and gas fees in 2022’s bear market curtailed MEV opportunities.
Q: How does MEV-Boost impact censorship resistance?
A: While some relays filter transactions, decentralized alternatives ensure network neutrality.
Q: What’s Lido’s role in Ethereum staking?
A: Lido dominates with 30% market share, offering liquid staking derivatives.
Q: When will Shanghai upgrade launch?
A: Estimated March 2023, pending developer consensus and testing.
Conclusion
The Merge reshaped Ethereum’s issuance, block finality, and MEV landscape—yet challenges like validator centralization and censorship persist. With Shanghai poised to unlock staked ETH, Ethereum’s next phase hinges on scaling solutions and decentralized governance.
👉 Stay updated on Ethereum’s evolution
Data as of December 2022. For the full Galaxy Digital report, visit Galaxy Research.
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