What is the Merge?
The Merge represents the Ethereum network’s shift to proof-of-stake (PoS), its new system (also called a “consensus mechanism”) for authenticating crypto transactions. The new system will replace proof-of-work (PoW), the more power-hungry mechanism pioneered by Bitcoin.
Why is it called the Merge?
Ethereum already has a PoS network called the Beacon Chain (introduced in 2020), but it is not yet used for processing transactions. For now, it’s essentially just a staging area for computers operating the Ethereum network to prepare for the PoS upgrade.
Ethereum’s full transition to PoS requires merging the Beacon Chain (called the “Consensus” layer) with Ethereum’s PoW mainnet (the “Execution” layer).
How does proof-of-stake (PoS) differ from proof-of-work (PoW)?
Proof-of-stake (PoS) and proof-of-work (PoW) differ in how they decide who has the right to record the next “block” of transactions on the network.
In today’s PoW system, Ethereum miners compete to publish blocks by racing to solve cryptographic puzzles, much like in Bitcoin.
In the upcoming PoS system, validators that stake (lock up) at least 32 ether (~$50,000) with the network are randomly selected to create blocks. The more ether one stakes, the more likely one is to be selected.
In both systems, the miner/validator that wins a block is rewarded with a mix of transaction fees and newly minted ether (ETH). PoS validators also receive rewards for doing other activities to help secure the network.
Will Ethereum fees decrease after the Merge?
Ethereum transaction fees are not expected to change as a result of the Merge. Future network updates, like danksharding and proto-danksharding, may help to address Ethereum's high network fees, but these updates are not expected until 2023 at the earliest.
The main salve for Ethereum’s transaction fee woes remains rollups – third-party networks like Arbitrum and Optimism that bundle transactions and process them separately from Ethereum’s mainnet.
Will Ethereum transaction speeds increase after the Merge?
Yes, but barely.
On average, Ethereum blocks are issued once every 13 or 14 seconds in today’s proof-of-work (PoW) system. After the merge, proof-of-stake (PoS) blocks will be issued in regular 12-second intervals. This is not an improvement that most users will notice, and it still places Ethereum behind rival blockchain networks like Solana and Avalanche (though well ahead of Bitcoin, where a new block is mined every 10 minutes on average).
What will happen to staked ether after the Merge?
Staked ether will stay locked up with the network until around six to 12 months after the Merge.
At that point, those who have staked ether themselves will be able to withdraw their stake, along with whatever rewards it has accrued.
Those who stake via centralized staking services or pools will need to keep an eye out for announcements on how withdrawals will be handled.