The highly anticipated Ethereum Merge is finally here. At the time of writing, there are less than 14 hours remaining until this historic event. The Merge is poised to be one of the most significant milestones in Ethereum's history. This article outlines the core metrics and data performance related to the event, helping you understand the key points of interest before and after the transition.
ETH Staking Explained
The Merge will finalize Ethereum's transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. Following the Merge, the network will no longer be secured by miners. Instead, individuals who stake their ETH will become the validators responsible for maintaining and validating the network.
Total Value Staked
Data from the full-chain blockchain explorer Tokenview indicates that the Beacon Chain deposit contract now holds over 13.7 million ETH, making it the single largest holder of ETH in the entire ecosystem. This staked amount represents 11.37% of all ETH in circulation. Of this, approximately 65% is considered liquid, while 35% is non-liquid.
The Beacon Chain currently has about 426,000 active validators and 80,000 unique depositors.
Distribution of Staked ETH
An analysis of entities reveals that a small number of them control a significant portion of the staked ETH. Data shows that the largest staking provider, Lido DAO, holds the biggest share with 31% of staked ETH. This is largely due to a key integration with Aave that propelled Lido to the top. Additionally, unmarked validators hold 23% of the ETH. Three major centralized exchanges—Coinbase, Kraken, and Binance—collectively account for nearly 30% of all staked ETH.
Client Diversity: A Critical Factor
It is crucial to monitor the diversity of clients on both the execution layer (which handles transactions) and the consensus layer (which handles Proof-of-Stake validation). If too many nodes run on a specific client and that client encounters a critical bug, every validator using it could be penalized.
While the distribution of consensus layer clients has improved significantly, the execution layer still faces challenges. Geth remains the client relied upon by the vast majority of nodes. A severe error in Geth could therefore lead to penalties for all execution layer validators dependent on it.
The Potential Impact on ETH's Value
The potential effect of the Merge on Ethereum's price has been a major topic of market speculation. Some analysts believe ETH's market capitalization could eventually surpass that of Bitcoin.
From a data perspective, although the current ETH price remains significantly below its all-time high, it has seen a 2.4% increase over the past 7 days, compared to Bitcoin's 7.9% gain in the same period. The debate on the Merge's ultimate impact on Ethereum's price is ongoing and far from settled.
Beyond price, the shift from PoW to PoS will reduce Ethereum's energy consumption by an estimated 99.95%. The group most affected by this change will be miners. Freddy Zwanzger, Ethereum Ecosystem Lead at infrastructure firm Blockdaemon, stated plainly: "The biggest losers post-Merge are the PoW miners. While they may attempt to create a PoW-ETH fork, such an initiative is unlikely to find long-term success. In contrast, validators staking ETH will clearly benefit from higher rewards."
Regarding ETH becoming a deflationary asset, Yearn core developer banteg noted on Twitter that a Base Fee of 15.43 Gwei is the threshold at which ETH's supply would become deflationary after the Merge.
Furthermore, the Merge has the potential to shift corporate perceptions of Ethereum. Paul Brody, EY's Global Blockchain Leader, stated that while the Merge won't affect most enterprise use cases currently in production, it will change how businesses view the Ethereum network. Brody explained that the Merge will ultimately pave the way for better scalability and privacy for enterprises.
"We are entering a new era for enterprise applications. As scalability and privacy mature, it will become possible to address enterprise process needs very comprehensively," he said.
Robert Crozier, Chief Architect and Global Blockchain Lead at Allianz Technology, mentioned that while it's still too early to gauge the full corporate reaction, his company will monitor the Merge's progress to see how it influences certain use cases. Allianz has so far only considered Ethereum for small-scale experimental purposes. The insurance giant currently uses Hyperledger Fabric and the Corda distributed ledger platform to streamline cross-border car insurance claims across Europe.
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Implications for DeFi and NFT Ecosystems
Ethereum is home to a massive ecosystem of Decentralized Finance (DeFi) and Non-Fungible Token (NFT) applications. The drastic reduction in energy consumption post-Merge is expected to be a major driving force for the continued growth of both sectors.
Santiago Portela, CEO of FITCHIN, commented: "The Merge is just the first step in Ethereum's scaling journey. The end result will be a network that is cheaper, faster, and easier to use. This foundation is absolutely critical for services like DeFi and NFT, which inherently require a faster and more affordable blockchain. In short, every application that relies on Ethereum will ultimately benefit from this transition to Proof-of-Stake."
To commemorate the historic event, several NFT projects have been launched. One example is EPICS // MERGE, the second part of the Proof of Beauty's EPICS project. This collection, featuring a theme of gods and heroes, consists of NFTs generated on-chain at 128x128 pixels to celebrate the arrival of the Ethereum Merge.
We will continue to provide the latest updates and information related to the Ethereum Merge.
Frequently Asked Questions
What is the Ethereum Merge?
The Ethereum Merge is the long-awaited upgrade where the Ethereum Mainnet merges with the Beacon Chain Proof-of-Stake system. It transitions the network's consensus mechanism from energy-intensive Proof-of-Work to the more efficient Proof-of-Stake.
How will the Merge affect Ethereum's energy consumption?
The shift to Proof-of-Stake is projected to reduce Ethereum's overall energy consumption by over 99.9%, making the network significantly more environmentally sustainable.
What happens to my existing ETH tokens after the Merge?
Your existing ETH tokens will remain unchanged and do not need to be upgraded or migrated. The Merge is a change to the consensus layer and does not affect user holdings or wallet addresses.
Can miners still participate after the Merge?
No, Ethereum mining will become obsolete after the Merge. Network security will be handled by validators who stake ETH instead of miners using computational power.
Will transaction fees (gas fees) become cheaper after the Merge?
Not immediately. The Merge is a change in consensus, not an expansion in network capacity. Significant reductions in gas fees are expected with future scaling upgrades, like sharding, which are planned to follow the Merge.
What is staking, and how can I become a validator?
Staking involves locking up ETH to help secure the network and validate transactions. You can become a validator by staking 32 ETH directly or by using a staking service that pools smaller amounts from multiple users.