As it is one of the largest players in the industry, there are thousands of projects that rely on the Ethereum blockchain when building their decentralized applications. Since the day it was established, ETH has been increasing its market share, and there are 2.1 million Google searches including its name every month. Its market value has reached more than USD 100 billion.

If the numbers aren’t enough, a survey carried out by the Bybit crypto exchange provides more proof. One in six American adults (15.4%) say that Ethereum is the second-most-popular alternative to Bitcoin.

The merge fundamentally changed the block's original mechanism because it completely altered the way new coins are created. This change was made to increase security and cut costs. Huge effects would have been seen throughout the blockchain industry if the change had been successful.

Let's look into the story of the merge first

The Proof-of-Work (PoW) process that was used to create the Ethereum blockchain depended on its miners and their powerful computers, just like BTC did.

The transition process and the work towards the merge started in Q4 2020, when the Proof-of-Stake (PoS) version of Ethereum Beacon Chain was launched.

After a long and exciting waiting period, the merge finally took place on September 15, 2022, ending the dependence on the PoW mechanism and switching to Proof-of-Stake instead.

The use of PoS instead of PoW has been a controversy in the blockchain field for a while now, with different parties defending different opinions about the two mechanisms. Yet there are also other mechanisms, and a consensus is emerging that one is more beneficial than either of these two mechanisms. Yet that is not our subject today.

What did this merger change in the industry and in Ethereum itself?

The Proof-of-Stake consensus mechanism operates on validators, who must stake coins on the blockchain to validate transactions and receive coins. To be eligible to validate a block, validators must lock up a minimum of 32 ETH. While mining rewards have decreased annually under the Proof-of-Work system, they will be even lower under Proof-of-Stake. Consequently, some miners may opt to remain with the PoW version of Ethereum.

Founder Vitalik Buterin has stated that while the merge represents a significant shift, it only constitutes half of Ethereum's overall transition plan. The subsequent stage involves fragmentation, which aims to divide the blockchain into parallel segments to enhance the chain's granularity and micro-management.

Although the merge aimed to create change and innovation in the functioning mechanisms of the Ethereum chain, it couldn't do this by magic all of a sudden. For instance, the transaction cost and speed were not going to fall and increase from one second to the next, and the changes might not have been observed immediately.

Some investors were also concerned that the merge would create an unstaked ETH flood into the market, but that did not happen. The Shanghai upgrade, which is due in 2023, is the date the staked ETH would be unlocked.

Finally, some speculators asserted that price movement would be simpler to predict following the merger and that the price of ETH would rise due to the anticipated immediate change in the market. However, doing so was akin to selling hope for something that had not yet materialized, which might cause prices to decrease rather than rise. People continued to invest because they anticipated a significant shift in the market or an immediate improvement until their high expectations were realized.

ETH merge benefits on DApp users

As we mentioned at the beginning, Ethereum has nearly 3,000 DApps on its blockchain, and it is a very interconnected and vast space. The impact of Ethereum on the crypto field was observed when high transaction fees were applied, scaring away DApp users. However, looking at the bigger picture, the merge eventually provided more security and scalability with less energy consumption.

The merge eventually created faster transactions with less energy consumption, as well as other benefits that might have only been observed in the long term.

Although ETH has a cap per year, it doesn't have a set maximum supply of coins. According to the Ethereum Improvement Proposal 1559, the ETH burning mechanism is based on transactions, yet the block still produces new ETH.

The merge lowers the annual number of ETH being created, which somehow affects the price of the coin.

Source: cointelegraph.com