Just-In: The Merge Will Not Impact Gas Fees, Transaction Speed, ETH Staking

Ethereum.org, the official website of Ethereum, has updated 8 misconceptions about the Merge as the community awaits the anticipated upgrade on September 15. The Merge will not reduce gas fees, make transactions faster, or enable withdrawal of staked ETH.

These changes will happen with the subsequent completion of the Surge, Verge, Purge, and Splurge phases and the Shanghai upgrade.

Ethereum Clears 8 Misconceptions About Gas Fees, Transaction Speed, Staking After the Merge

Ethereum.org updated 8 misconceptions about the Merge on August 17 as the anticipated date of the upgrade draws near. Ethereum is a transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus with the merger of the Ethereum Mainnet and Beacon Chain. It will reduce power usage by 99%.

Users don’t need to upgrade software, transfer funds, or send ETH in order to move to proof-of-stake Ethereum. However, users need to be aware of scams during the Merge and misconceptions about the Merge.

• Misconception 1: Merge Will Reduce Gas Fees

The Merge will change the consensus mechanism to PoS, but not expand network capacity or throughput to lower gas fees. In fact, the gas fee depends on the Ethereum network demand.

However, the transition to PoS will help focus on increasing scalability in the Surge phrase through sharding and rollups to significantly reduce gas fees.

• Misconception 2: Merge Will Increase Transaction Speed

The transaction speed will not increase much as blocks will be produced only 10% faster on PoS than PoW. It introduces the transaction finality and epochs concepts.

However, users can expect a faster transaction speed of 100,000 transactions per second after the completion of all phases of the Ethereum upgrade.

• Misconception 3: Merge Will Enable Staked ETH Withdrawals

The Merge will not immediately enable withdrawal of staked ETH (stETH). The Shanghai upgrade will only enable staked ETH withdrawals. It means Ethereum assets will remain locked and illiquid during the waiting period of 6-12 months.

• Misconception 4: Validators Will Not Receive Liquid ETH Rewards

Validators will have immediate fee rewards and maximal extractable value (MEV) earned during block proposals on the Ethereum Mainnet. On the Beacon Chain, the newly issued ETH will be locked until the Shanghai upgrade.

• Misconception 5: All Stakers Will Exit At Once After Enabling Withdrawals

After the Shanghai upgrade, all validators will be incentivized to withdraw staked ETH or stake more using rewards. Moreover, validator exits are rate limited for security reasons that allow only 6 validators to exit per epoch or 6.4 minutes.

• Misconception 6: Staking APR Will Triple After the Merge

The APR may only increase by nearly 50%, not 200%. The more fees paid by users will increase validators’ fee rewards.

• Misconception 7: Running a node requires staking 32 ETH

Mining nodes under proof-of-work (PoW) and validator nodes under proof-of-stake (PoS) require economic resources to process a block. A non-block-producing node doesn’t require ETH, but a computer with 1-2 TB of available storage and an internet connection. These blocks help increase the security, privacy, and censorship resistance of the Ethereum protocol.

• Misconception 8: Merge Will Result in Downtime of Ethereum Blockchain

The Merge will be triggered by the terminal total difficulty (TTD) to transition the Ethereum to PoS automatically. There is no downtime.

ETH Deflationary After the Upgrade

Ethereum will become a deflationary asset after the Merge as the supply deflates over time due to the EIP-1559 burning mechanism.

The ETH prices will likely increase due to demand under the right market conditions. According to Vitalik Buterin, Ethereum will gain demand 6-8 months after the Merge.