The Ethereum Merge Promised to Fix Everything. Two Years Later, Here Is What Actually Changed

People in the cryptocurrency community still discuss a September 15, 2022, event with a certain reverence, akin to remembering where they were when a space shuttle launched. After nearly seven years of preparation by engineers, developers, and idealists, Ethereum’s network silently flipped a switch at 2:44 AM UTC. No detonation. No breakdown.

No spectacular failure. The blockchain continued to function, but it was now powered by a completely different engine. For a split second, it seemed as though everything was going to change after the Merge. It feels more difficult to sit with that memory two years later.

It was a huge promise. In order to reduce power consumption by approximately 99.95%, Ethereum, the second-largest blockchain in the world, would switch from its energy-intensive proof-of-work system to proof-of-stake. That figure isn’t marketing gibberish; it actually happened. Within days of the change, a single transaction that had a carbon footprint of 109.71 kilograms of CO2 decreased to just 0.01 kilograms.

To put things in perspective, the old Ethereum network used about as much electricity as Bangladesh as a whole. Just that comparison garnered media attention, sparked debate, and won over detractors who had written off blockchain technology as an environmental disaster disguised in financial jargon.

For Ethereum, the environmental dispute had been a real wound. Sustainability reports were quietly embarrassing institutions that wanted to participate in decentralized finance. Anything related to cryptocurrency mining was being viewed negatively by ESG-conscious investors. The global accounting behemoth EY was hosting hiring events inside Decentraland, an Ethereum-based metaverse platform, and the underlying infrastructure was raising unsettling concerns.

Those questions mostly vanished after the merger. There is a feeling that the change altered a discussion that had been dragging on in the industry for years, rather than merely solving an engineering issue.

Here’s what remained the same, though, and this is where things get interesting. During peak demand, gas fees—the transaction costs that have irritated regular Ethereum users since the network scaled up—remained obstinately high. The technical fact that the Merge was never designed to directly address gas fees was overlooked in favor of the larger excitement.

The capacity of the network did not increase overnight. Ethereum’s transaction processing capacity remained relatively constant, ranging from 10 to 30 per second. Even though the developers had been open about it from the beginning, this felt like a quiet letdown for anyone who had hoped the Merge would make small transactions affordable once more.

Sharding has long been identified as the next piece of the puzzle by Vitalik Buterin, who appears to be years younger than the person who created the financial infrastructure that BlackRock and Robinhood currently operate on. Instead of requiring each node to handle every task, sharding would divide the network’s computational load among numerous nodes. Theoretically, it pushes Ethereum’s processing capacity closer to 100,000 transactions per second, surpassing Visa’s capacity.

However, the plan changed. Sharding plans were pushed aside by the emergence of layer 2 solutions, which are secondary networks built on top of Ethereum that process transactions more cheaply. It’s still unclear if the full sharding vision will materialize on time or if layer 2 technology will covertly take its place.

Then there’s the decentralization issue, which sits like a low hum beneath the entire story but isn’t as frequently discussed in mainstream media. In order to participate in network security, proof-of-stake requires validators to lock up 32 ETH. This substantial financial commitment, according to critics, naturally concentrates power among the wealthy.

What the data reveals about staking providers is more concerning. Over half of all ETH stakes are held by four companies: Lido, Coinbase, Kraken, and Binance. For a system whose entire philosophical identity is based on the concept of decentralization, that is an impressive concentration.

The action taken by U.S. regulators against Tornado Cash, a tool for anonymizing Ethereum transactions, highlighted an unsettling fact: governments have easier access to ostensibly decentralized systems than the original vision suggested.

It’s difficult to ignore the fact that the Merge achieved technical success in ways that, five years ago, would have seemed nearly impossible. It is truly amazing engineering to run two parallel systems, the original Mainnet and the Beacon Chain, which launched separately in December 2020, and then merge them mid-flight without losing a single transaction. It was once described by Vitalik himself as “hot-swapping a spaceship engine while the ship was already in flight.”

The swap’s flawless execution, which preserved every account balance and every byte of transaction history dating back to Ethereum’s founding in July 2015, is a credit to years of meticulous, patient work by individuals who are rarely mentioned in the financial press.

After seeing this develop over the course of two years, it is fair to say that the Merge fulfilled all of its energy-related promises, established a crucial foundation for future scaling, and largely left several more difficult issues unresolved. The network is considerably more environmentally friendly.

Tokenized assets, stablecoins, and next-generation financial products are all being developed by institutions using Ethereum’s infrastructure, which they can defend to boards that are concerned about sustainability. That is true. However, layer 2 networks—rather than Ethereum’s base layer—remain crucial for the average user seeking quick and inexpensive transactions.

One minor but significant detail is that the term “Eth2” has been quietly retired. Eth2 does not exist. There is only Ethereum, which is developing, layered, more effective, still flawed, and becoming more and more integrated into the type of institutional finance that its founders initially envisioned upending. It probably depends on who you would have asked in that old Berlin loft whether that was the revolution they were aiming for or a milder version of it.