Ethereum Merge

A major event the crypto industry, Ethereum’s Merge, has long been awaiting finally happened on 15th September 2022 which proponents say could boost crypto prices in the long run and significantly change the future of cryptocurrency. The Merge is an upgrade to the Ethereum blockchain, which powers innovations in the crypto ecosystem like non-fungible tokens (NFTs). There's been a boom in crypto investing in recent years, with the value of the overall market more than doubling at one point last year as people piled their money into bitcoin, ether, dogecoin and other cryptocurrencies. Whether you are super into crypto and following every latest development in the space or you own a bit of crypto via a platform like Coinbase or Venmo, if you've heard about the so-called Merge you may be wondering what it actually means for you.

The upgrade transitioned Ethereum from Proof of Work (PoW) to the Proof of Stake (PoS) model, which is a more energy-efficient and environmentally-friendly system. It entails nodes being selected via an algorithm that has a preference for nodes that hold more of a network's currency. In other words, their "stake" in the network is rewarded over the computer power that's rewarded in the proof-of-work system. Proponents say that the transition allows the Ethereum network to reduce its energy consumption by around 99%.

Methodology

In my opinion, there is no doubt that The Merge upgrade is actually good not only for the Ethereum network but for the whole cryptocurrency market. Maybe not in short term but It will definitely make an impact in the future.

Anyway in this dashboard, I am going to show you some metrics as proof that this update has made an impressive good impact on the Ethereum blockchain only after 2 weeks of its implementation.

Based on the above charts, we can clearly realize the good impact of the Ethereum merge upgrade on its blockchain.

As we see, The Number of Successful Transactions (and also TPS: Transactions Per Second) on the Ethereum network has increased after this upgrade.

Moreover, The Number of Active Users on this blockchain has experienced a raise after the Merge upgrade.

Although the Merge upgrade does not have an impressive impact on the transactions fee on the Ethereum network by itself (the transactions fee will be decreased dramatically after future upgrades), we can still see the Transactions Fee has reduced slightly after the Merge upgrade and this is actually good news because high transactions fee is one of the main problems of Ethereum network.

As a better understanding view, on the above pie-charts, we can obviously see that the daily average number of transactions and active users after the Merge upgrade is more than before Merge and on the other hand, Transactions Fees has decreased slightly after this event.

Also based on the above charts, we can see after the Merge upgrade, there are more and more new first-time users that have interacted with the Ethereum network and this can be another good impact of Merge upgrade on this network.

As we see, the swap activity on the Ethereum DEXs have increased after the Merge upgrade and also the average daily number of swaps after the Merge upgrade is more than befor merge upgrade.

So, this is another good impact of Merge upgrade on the Ethereum network and its decentralized exchanges (DEXs).

Based on the above chart, we can see more number of daily NFT sales after the Merge upgrade compared to the days before this update and this is another good impact of this event on the Ethereum ecosystem.

Even on the above charts, we can see more and more positive impact of Merge upgrade.

As we see, the number of NFT mints and also minter after the Merge upgrade have been increased significanlty compared to the days before this update and this is actually another good impact of this upgrade on the Ethereum network since there are more and more minted NFTs in this ecosystem that will result in impressive growth on NFTs on Ethereum.

Based on the above and left charts, Although we can see some high spikes during weeks and days before the Merge upgrade, but the average daily ETH stake activity have been increased significantly after Merge upgrade and this can be another good impact of this event on Ethereum network and its staking platforms.

And as a clearer and better understanding result, on the above pie-charts, we can clearly see the increasing ETH stake activity after the Merge upgrade compared to the days before this update especially on Volume of Stakes that increased dramatically after this event.

One of the health factors for an asset’s derivates is the peg metric. Ideally, the price of ETH derivates should be equal to the main ETH.

On the above charts, I have calculated the ratio of derivates to the real ETH price (closer to 1 more ideal). As we see, during the recent days before the Merge and especially after Merge event. these derivates prices are getting closer and closer to the ETH price (closer to number 1) and this can be another positive impact of Merge on Ethereum ecosystem.

Based on the community opinion, after switching to PoS, Ethereum network and ETH volatiles should decrease significantly and this impact is visible on ETH derivates only after 2 weeks after the Merge upgrade.

On the above charts, the significant impact of Merge upgrade on Ethereum block production is clearly visible.

There are more and more produced blocks by Ethereum block producers after The Merge upgrade compared to before this event.

Also, we can see there are dramaticall more number of users who are participating in Ethereum block production after the Merge upgrade and this means more rewards for more people.

The Merge Impact on the Swaps Activity on Ethereum Decentralized Exchanges (DEXs)

From the beginning until now, one of the main problems of decentralized exchanges (DEXs) especially those who are on the Ethereum network, was their high transactions fee. So, when the transactions fee is decreased (after the Merge upgrade and other future upgrades) there must be more and more activity of transactions on these DEXs by users.

On below, I have analysed the swap activity of users 1 month before the Merge upgrade and After the Merge upgrade to check its impact on different metrics:

The Merge Impact on Ethereum’s NFT Ecosystem

Similar to the decentralized exchanges, one of the main problems of NFTs activity on Ethereum network was this blockchain’s high transaction and gas fees. This can be also one of the main reasons that some users are using NFTs on other blockchains such as Solana, Flow and etc… .

So, when the transactions fee is decreased (after the Merge upgrade and other future upgrades) there must be more and more activity on NFT ecosystem of Ethereum blockchain.

The Merge Impact on Ethereum Network

The Merge Impact on ETH Liquid Stakings (Lido’s stETH, Ankr’s aETH, Rocketpool’s rETH , …)

Ethereum's new validator system ushered in a new cast of characters responsible for keeping the chain up and running. With these new characters came new concerns around network centralization. Shortly following the Merge, Gnosis Chain founder Martin Köppelman drew attention for a tweet observing that 420 of Ethereum’s first 1,000 proof-of-stake blocks were proposed by just two entities: Lido, the community validator collective we’ve talked about before in this newsletter, and Coinbase, the U.S.-based crypto exchange. Ethereum developers frame proof-of-stake as a more decentralized and secure alternative to mining – making it possible for anyone with 32 ETH to play a role in supporting the network, no fancy equipment required. Ethereum’s pool operators can, at least for now, act without fear that their users will get angry and cut ties. (To be fair, Lido spreads its stake among several different validator services – meaning it should be more difficult for one party to act unilaterally against the network’s best interest.)

In addition to the above facts, I have analysed the ETH stake activity on several platforms as below:

The Merge Impact on Ethereum Blocks’ Performance

Proof-of-Stake’s lottery-based system for proposing blocks is vastly more energy efficient than its power-hungry proof-of-work predecessor. based on Vitalik Butrin (Ethereum Co-Founder) tweet, the world global energy usage decreased by 0.2% after The Merge upgrade and who can say this is not a great impact of Merge ?!

Also with Ethereum’s update to proof-of-stake, the network has drastically reduced the amount of new ETH issued with every block. In the long term, due to a burning mechanism introduced with the network upgrade EIP-1559, there’s a possibility that this may make Ethereum deflationary – meaning its token supply could decrease over time.

In addition to above facts, on the below I have analysed the block production metric before and after the Merge upgrade:

Conclusion

In the above analysis, we have seen several positive impacts of the Merge upgrade on the Ethereum ecosystem (also there are more and more which are not mentioned on this dashboard). This event has impressive good impacts on the number of transactions, number of users, number of swaps on DEXs, block performance, staking platforms, NFTs ecosystem, and also whole world global energy usage.

Maybe one of the reasons that some users are saying bad things about Ethereum Merge is because of its price drop after this event. as an answer to this, I shall say the Merge upgrade is not a reason behind this price drop. The price decrease is because of many other factors such as whole world inflation, increasing rate of DXY, increasing interest rate, the bearish situation of all financial markets, less whale activity, Bitcoin price drop, and many other factors.

Also specifically for Ethereum, maybe one of the reasons behind its price drop is because ppl tend to not risk during the days before and after the Merge upgrade and they want to make sure this update is completely successful (which is, in my opinion). Also, since users can not unstake their deposited ETH from platforms until the next 6-12 months (shanghai upgrade) most ppl have withdrawn their staked assets and sold them. Moreover, since legacy miners will not play a role in the PoS system, most of these users have sold their mined ETH in the days before the Merge upgrade

(you can see a full analysis of these miners’ activity on this dashboard: )

None of the above reasons is a bad impact of Merge on Ethereum and it is actually the world and the users’ reaction to this upgrade that comes from their behavior.

Also, there are more and more interesting features that will be added to the Ethereum network (such as shanghai upgrade or sharding or etc …). these updated could not be implemented on the Ethereum PoW mechanism. So, After switching to the PoS method, there is actually a bright future for the Ethereum ecosystem and its amazing handy upgrades.

Discord: Ali3N#8546