Ethereum: Ten Characteristics of the Post-PoS Era

An Ethereum merger is one of the most powerful catalysts in cryptocurrency history, and it’s coming soon.

As we reach the endgame of Ethereum under the PoW consensus mechanism, let’s talk about the 10 important features of the merged PoS Ethereum.

One: After the merger, the fees of Ethereum L1 mainnet will not decrease

The purpose of the merger is to abolish Ethereum's PoW consensus mechanism and replace it with PoS.

Fees are a function of block space requirements and are not affected by the consensus mechanism.

To reduce fees, use L2 (already live) to perform operations.

Second: There will be no structural selling pressure in the 6-12 month window after the merger

The pledged ETH and block rewards issued to validators cannot be withdrawn before the withdrawal function is enabled.

However, the tip portion of the gas fee and MEV can be withdrawn (basefee will be burned).

Third, the combined inflation rate dropped from 4.3% to 0.22%
We assume that the annual gas fee is 500,000 ETH. After the merger, the daily ETH issuance will drop from 14,250 ETH/day to 736 ETH/day.

This means that issuance has been reduced by 95% — yes, 95% less ETH is available to be sold every day.

4. Ethereum network under PoS will have better security than PoW

That is: the cost of attacking the PoS chain is higher.

This has been debated beyond recognition - but it is mathematically more costly to attack an Ethereum network under PoS than under PoW.

This is best described in @VitalikButerin’s article “Why Proof of Stake”.

5. ETH is usually deflationary

Due to EIP-1559’s fee burn, ETH will be deflationary in most situations.

A picture is worth a thousand words. The additional issuance plan is shown in the figure below.

In short, even if the total staked amount reaches 100 million Ethereum and the network does not generate any gas fees, the annual inflation rate of ETH is only 1.51%.

6. Mining revenue increased by 50% (conservative estimate)

The current ETH staking yield is 4.2%.

After the merger, the staking yield will jump to over 6% due to the inclusion of transaction fees and MEV earnings to validators.

Seventh: The merged ETH will have value storage and collateral properties

After the merger, ETH will have the same value storage properties as BTC and will be able to become the original collateral.
BTC has already solidified its claim as "digital gold", and ETH will become both: a "digital bond" (collateral yield = risk-free rate) and the primary collateral asset for DeFi.

8. Ethereum will be more sustainable than Bitcoin

After the merger, the Ethereum blockchain will be more sustainable than the Bitcoin blockchain.
In addition to PoS being more energy-efficient than PoW (using 99% less electricity), the overall cost of the Ethereum network is also lower.
@ryanberckmans explains this clearly.

9. ETH expansion is coming!

The merger swaps Ethereum’s consensus engine to PoS for improved security.

Secure Ethereum mainnet L1 benefits from L2 rollups — this is where the scaling magic happens.

Scaling technologies are developing rapidly: Polygon, Arbitrum, Optimism, StarkWare, zkSync, etc.

10. After the merger, Ethereum’s journey will not end
Although Ethereum L1 will become largely fixed after the merger, the technology will continue to develop.

Data sharding, lightweight clients, fixed-quota withdrawals, state management, and more technical features are coming.

Finally, let me say this again: the Ethereum merge is one of the most impressive engineering feats in blockchain history.

Under the full PoS mechanism, the Ethereum network will have an economic structure that improves security, expands through L2, develops its DeFi and NFT platforms, and surpasses BTC.

References:

https://vitalik.ca/general/2020/11/06/pos2020.html

https://ethereum.org/en/layer-2/

https://wenmerge.com/

https://l2beat.com/