What the Ethereum Merge Means for Gas Fees?

The Ethereum merge is upon us. According to current projections, tonight should see the long-awaited transfer of the second-largest cryptocurrency by market capitalization to a proof-of-stake algorithm.

Key Takeaways

  • The Ethereum merge is expected to help reduce the energy consumption of the cryptocurrency
  • It is also important to understand that the merge will not make the popular high gas fees of Ethereum reduce
  • The Ethereum Merge will not have any effect on the fastness and swiftness of transactions on the blockchain

There have been persistent reports that this update will make Ethereum faster and more affordable. But according to the Ethereum Foundation, this isn’t the case—at least not yet.

The merge represents Ethereum’s widely reported transition to proof of stake. The cryptocurrency network now employs the same proof-of-work consensus network as Bitcoin.

gas fees
Photocredit: Edge Wallet

Processing new transactions on the network requires a significant amount of electricity (more than entire nations), which is an extremely energy-intensive method of maintaining network security.

However, proof of stake is different. Validators are required in place of miners. Users with at least 32 ETH available to “stake,” or pledge to the network, are eligible to become validators.

Users can even participate with smaller amounts of ETH through staking pools or cryptocurrency exchanges. Ethereum switches to that consensus method starting today.

The Ethereum Foundation says that this method of operation will increase the network’s energy efficiency by more than 99%, which is a solution to the energy consumption of proof of work.

However, today’s update does not address additional issues with Ethereum’s capacity and throughput, for example, how many transactions are processed per second. The community hopes that this will happen in the future.

Although Ethereum’s switch to a new consensus protocol may result in a more energy-efficient blockchain, it does not necessarily guarantee that transactions will occur faster.

Why? Because according to the Ethereum Foundation, switching to proof of stake won’t result in blocks being created any more frequently than they are under the proof of work.

Faster Ethereum transactions would be great since they give you confidence, much like when you make an online purchase with a credit card. However, with this crypto network, things won’t accelerate all that significantly just yet.

According to the foundation, “Though some slight changes exist, transaction speed will mostly remain the same on layer 1. This is a fairly insignificant change and is unlikely to be noticed by users.”

Ethereum Gas Fee

Many believe that the switch to proof of stake will reduce the extremely high gas fees associated with transactions on Ethereum. Although it is hoped that they will decrease with subsequent improvements, for now, this is untrue.

On Ethereum’s blockchain, numerous applications and cryptos operate. This means that you will frequently require some Ethereum—and occasionally a lot of Ethereum—to pay for the transaction if you want to use such applications (such as decentralized exchanges or DeFi lending protocols).

Due to the network’s notable high fees, some users have decided not to use the blockchain and turned to “Ethereum killers,” including Tezos, Solana, or Avalanche, to mint NFTs.

Ethereum is switching to proof of stake, which the foundation claims will increase energy efficiency by more than 99% without lowering costs.

According to P.J. Murphy, CEO of Artgreen, an Ethereum-based creative DAO that focuses on promoting investments into CryptoArt, “there will just be reduced energy use overall.”

This upgrade will alter Ethereum’s monetary policy. However, there is a widespread belief that ETH, the native coin of the blockchain, will experience deflation; but this is untrue. The switch to proof of stake will make the coin more susceptible to deflation. Why? Because people who maintain the network’s security will receive lower rewards in cryptocurrency than before.

The first stage towards enabling sharding will be a migration to PoS. Shard chains will offer technology that will increase transaction volumes and scalability while lowering congestion. Even from major payment service providers on the market, Ethereum, which may reach up to 100,000 TPS, can achieve excellent efficiency.

About Author

gas fees
Florence Anderson
In-depth Crypto Researcher, with a decade's experience in cryptocurrency and blockchain technology. Highly innovative and open-minded.

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