Despite the recent evolution of the ether price, the network has been thriving since the "merger" and could just be getting started. A year ago, Ethereum underwent a major technical transition aimed at improving its security in an energy-efficient manner that many expected would lead to higher prices and, separately, open up a new yield-generating opportunity for investors. The price of ether has dropped over the past six months, but is still up 8% over the past year and nearly 35% so far this year, according to Coin Metrics. With the crypto market as a whole suffering from low liquidity and volatility amid regulatory uncertainty, incremental regulatory and technical advances in Bitcoin and Ethereum have not been enough to drive prices to new highs following the banking crisis-driven rally a early this year. Still, market participants are seeing and feeling the success of the Ethereum merger. “ETH's transition to proof-of-stake created a more composable, cheaper, and less energy-intensive network that currently generates around 4% of takers,” said Matthew Sigel, head of digital asset research at VanEck. “But with Treasury bills yielding 5% and the US regulatory attack underway, investor and developer interest has been insufficient to drive the token much in recent months.” “Ethereum daily gas rates languish near 2023 lows and daily trading activity at 2-year lows,” he added. “We look forward to the Ethereum EIP-4844 protocol update in Q4, which should enable much cheaper transactions on Ethereum-compatible Layer 2s and potentially catalyze broader adoption of loyalty applications and stablecoins.” Here's how Ethereum is doing on some of its post-merger goals: Performance Ether's benchmark staking reward rate was 5.854% annually on September 15, 2022, according to Ethereum data provider Beaconchain . It spiked to around 8% after the FTX crash and in May following JPMorgan's acquisition of First Republic. Yields were last at 3.9%. Performance changes depending on staking participation levels and the Ethereum transaction validation process. It is expected to fall as more participants enter the network. (For more information on betting, check out our guide here.) More validators The amount of ether staked has increased steadily over the past year and investors are eager to earn additional returns on their assets. While the merger gave investors the opportunity to earn returns (by locking up their funds), this year's Shanghai Upgrade, also known as Shapella, gave them the ability to unwind their funds. The Shanghai upgrade was widely seen as an event that would bring more liquidity to Ethereum. "While the market has been really stagnant in terms of digital assets, betting has been one of the few areas that has seen consistent growth in this period," said Andrew Ballinger, head of betting solutions at the Canadian investment firm 3iQ. "About a week later [Shanghai] "It happened in April, we started to see assets entering the network to be staked, outpacing assets being withdrawn," he added. "That really shows the immediate interest of people who were sitting on the sidelines, who hadn't been betting up until that point, to start doing it." The percentage of the ether supply being staked has increased from 11.99% on September 15, 2022 to 20.46% on August 30 of this year. Burning Fees and Declining Supply Ethereum has a programmed mechanism to regulate the network's notoriously high transaction fees, called gas fees, by "burning" them. New ether is issued to the market every day and if demand does not match the supply level, the price falls. After the merger, investors expected that there would be less supply on the market, and if demand remained constant, the price would increase. Since the merger, ether supply has fallen 0.248%, according to data provider Ultrasound Money. About 681,449 ETH have been issued while 981,427 have been burned. "The supply of ETH now depends to some extent on usage: the more it is used, the more ETH is burned," said Maria Shen, general partner at Electric Capital. “Just before the merger, the supply of ETH peaked and we are now on a flat, deflationary supply curve.” "Every time someone makes a transaction, they pay a fee," she explained. "Some of that fee is now being burned, and every time you do that, the supply of Ethereum shrinks. So you effectively have a deflationary supply of ETH," meaning that over time the supply will start to decline. decrease rather than increase, which historically occurs. what has always been done: "as long as people continue using the network." The next upgrade The merge was just the first step in a series of planned upgrades to make improvements to Ethereum. Blockchain is the most popular among developers who want to build a new world of applications with this technology. But, in recent years, it has been hampered by its famously slow transaction times and atrocious transaction fees. Those specific problems gave rise to alternatives like Solana and Cardano. If Ethereum can speed up transactions and resolve the fee structure, it could become more competitive, Shen said. "Those no longer become differentiating factors," she said. "So those ecosystems will be forced to figure out other differentiating factors. Many of them scale in different ways with different types of trade-offs, so that's one consideration: What are the trade-offs that users are willing to make?" "It's not enough for something to be fast, you need something that can do it on the chain."
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It’s been one year since the Ethereum merge. Here’s how the network is doing on its goals.
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