The Merge—Ethereum’s historic transition from proof-of-work (PoW) to proof-of-stake (PoS)—officially occurred on September 15, 2025. Over 60 days have passed since this pivotal moment, offering enough time to assess whether Ethereum has truly passed its "big test" and if it’s now on track toward a more scalable, secure, and sustainable future.
In this deep dive, we’ll explore the real-world impact of The Merge across key dimensions: deflationary momentum, decentralization concerns, regulatory risks, and the current state of the network. We’ll also examine what lies ahead—from upcoming upgrades to Layer 2 innovation—and how Ethereum continues shaping the Web3 landscape.
Was Deflation Achieved After The Merge?
Source: Ultra Sound Money
One of the most anticipated outcomes of The Merge was Ethereum’s potential shift into a deflationary asset. Thanks to the combination of EIP-1559 (which burns base fees) and PoS’s reduced issuance rate, many speculated that ETH could enter a long-term supply contraction.
And the data confirms it: over 5,915 ETH have been removed from circulation in the first 60 days post-Merge, marking Ethereum’s entry into a deflationary regime.
Let’s break this period into three distinct phases:
Phase 1: Mild Inflation (Sep 15 – Oct 7)
During the initial 22 days, Ethereum experienced mild inflation due to low on-chain activity amid a bear market. Most transactions were swaps, NFT trades, and Layer 2 interactions, with average gas prices between 10–15 gwei.
Despite limited usage, Ethereum only issued 12,400 ETH, averaging 563 ETH per day—a dramatic drop compared to the pre-Merge rate of ~15,000 ETH daily. This alone represents more than a 70% reduction in issuance, far exceeding the much-hyped “triple halving” narrative.
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Phase 2: Surge in Activity (Oct 8 – Nov 8)
A major catalyst emerged: the launch of XEN, a self-proclaimed “proof-of-trust” token that incentivized mass minting and trading. This triggered sustained network congestion, pushing gas prices to 20–50 gwei.
As a result, EIP-1559 burn rates spiked. By November 8, nearly all ETH issued during Phase 1 had been offset by fee burns—demonstrating the powerful deflationary mechanics now baked into Ethereum’s core.
Phase 3: FTX Collapse & On-Chain Panic (Nov 9–18)
The collapse of FTX sent shockwaves through the crypto ecosystem. Users rushed to withdraw funds from centralized exchanges, triggering a wave of wallet-to-wallet transfers and DeFi movements.
Gas fees briefly exceeded 100 gwei, leading to a sharp increase in ETH burned. While still far below peak牛市 levels (where gas often hit 300–500 gwei), the network handled stress effectively—and entered a sustained deflationary phase.
Net Supply Impact
- First 22 days: ~320,000 fewer ETH issued
- Next 30 days: ~450,000 fewer ETH issued
- Final week: ~110,000 fewer ETH issued
Total reduction: ~880,000 ETH (worth over $1.1 billion at current valuations).
This suppressed sell pressure from miners (who previously needed to “mine and sell” to cover costs) helps explain why ETH has remained relatively resilient even as BTC broke below previous lows during the FTX crisis.
Is Ethereum Too Centralized Now?
Critics have raised concerns about centralization in PoS Ethereum, citing two main issues:
- MEV Relays and OFAC Compliance: Data from mevwatch shows ~88% of relayed blocks comply with OFAC sanctions.
- Staking Concentration: Lido controls over 30% of staked ETH, raising fears of centralized control.
But let’s put this in perspective.
Regulatory Compliance ≠ Censorship
Yes, many block builders follow OFAC guidelines—but censorship resistance isn’t binary. Even if major relays filter certain transactions, others can still include them. As long as not all validators collude, users can eventually get their transactions processed—albeit with longer wait times.
Moreover, decentralized alternatives like MEV-Boost bypass services and distributed validator technology (DVT) are emerging to dilute centralization risks.
Staking Centralization: A Temporary Phase?
While Lido and Coinbase dominate staking, remember:
- Bitcoin’s mining power is even more concentrated: top 3 pools control >50% hash rate.
- Lido is a protocol—not a company with unilateral control. No single entity can “pull the plug.”
- Vitalik Buterin has acknowledged the concern but emphasized that these players are largely aligned with Ethereum’s success.
“We should welcome all staking providers—but long-term, we need better decentralized solutions.”
— Vitalik Buterin, post-Merge interview
Solutions like SSLE (Solo Staking Lite), Pooled Staking DAOs, and non-custodial liquid staking protocols are gaining traction. Over time, they’ll reduce reliance on centralized intermediaries.
Should We Fear SEC Regulation?
A common fear post-Merge: Could ETH now be classified as a security under U.S. law?
The argument hinges on the Howey Test, which defines an investment contract as:
- An investment of money
- In a common enterprise
- With an expectation of profit from others’ efforts
Some claim staking ETH meets this definition. But consider:
- Dozens of PoS chains exist—why single out Ethereum?
- If regulators wanted to classify ETH as a security, they could have done so years ago.
- The U.S. is actively promoting Web3 innovation. Wall Street institutions, developers, and millions of users are invested in Ethereum’s open infrastructure.
And let’s not forget: the SEC lost its case against Ripple after years of litigation—proving enforcement isn’t guaranteed.
Ultimately, whether ETH is deemed a security depends less on technical criteria and more on regulatory intent. Given Ethereum’s role as foundational tech for DeFi, NFTs, and smart contracts, treating it as a security would stifle innovation—and that’s unlikely in a pro-tech environment.
Current State of the Ethereum Network
So far, Ethereum has performed flawlessly:
- No critical bugs or security breaches
- Smooth transition with zero downtime
- No required user or dApp changes
The “rock” that hung over the community’s head? It’s officially off.
Developers are now focused on next-phase upgrades:
Shanghai Upgrade – Coming Soon
Key proposals include:
- EIP-4844 (Proto-Danksharding): Reduces Layer 2 transaction costs by introducing blob-carrying transactions.
- Staking Withdrawals: Allows validators to withdraw their staked ETH and rewards—long-awaited functionality that will improve liquidity and trust in the staking ecosystem.
Both features are expected to roll out in early 2026.
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Layer 2s Are Stealing the Spotlight
Data from Orbiter Finance shows a milestone: on November 8, Layer 2 transaction volume surpassed Ethereum mainnet.
This signals a maturing ecosystem where scaling solutions like Arbitrum, Optimism, and zkSync handle the bulk of user activity—while inheriting Ethereum’s security.
New blockchains aiming to be “Ethereum killers” now face fierce competition—not just from Ethereum itself, but from high-performance L2s built on its foundation.
Frequently Asked Questions (FAQ)
Q: Is Ethereum officially deflationary now?
A: Yes—thanks to EIP-1559 burns and reduced PoS issuance, Ethereum has entered a deflationary phase when network usage is moderate to high.
Q: Does OFAC compliance threaten Ethereum’s decentralization?
A: Partially—but not fatally. As long as alternative relays and censorship-resistant tooling exist, users retain transaction freedom over time.
Q: Can I unstake my ETH after The Merge?
A: Not yet. Withdrawals will be enabled in the upcoming Shanghai upgrade, expected in early 2026.
Q: Did The Merge solve scalability issues?
A: Not directly. Scalability improvements come with future upgrades like EIP-4844 and full Danksharding—set to roll out over the next few years.
Q: Why hasn’t ETH price surged after The Merge?
A: Market sentiment remains bearish due to macro conditions and exchange collapses (e.g., FTX). However, fundamental improvements—like deflation and energy efficiency—are building long-term value.
Q: Are there risks in relying on Lido for staking?
A: Yes—concentration risk exists. Diversifying staking providers or using solo staking reduces dependency on any single platform.
Final Thoughts: The Journey Has Just Begun
Sixty days after The Merge, Ethereum has proven its resilience. It passed the immediate test with flying colors—no crashes, no exploits, no chain splits.
Instead, it achieved something profound:
✅ Dramatically reduced inflation
✅ Entered deflation under real-world conditions
✅ Maintained decentralization despite growing pains
✅ Set the stage for future scalability via L2s and upgrades
The Merge wasn’t the finish line—it was the starting gun.
With Shanghai on the horizon, staking withdrawals coming soon, and Layer 2s taking off, Ethereum is evolving into a leaner, greener, and more efficient platform for global digital economies.
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The stars may indeed be within reach.