Proof of Stake Delivered: The Merge and Post-Merge Ethereum (2022)

For years, Ethereum’s plan to transition from Proof of Work (PoW) to Proof of Stake (PoS) was treated as both inevitable and impossible. It was inevitable because the research and roadmap pointed there. It was “impossible” because coordinating a live network upgrade at global scale is brutally hard.

Then it happened. On September 15, 2022, Ethereum completed the Merge, switching its consensus mechanism to Proof of Stake.

This event is one of the most important milestones in Ethereum’s history–technically, economically, and culturally.

1) What the Merge actually did

A common misconception is that the Merge “made Ethereum faster” or “lowered fees.” In reality, the Merge primarily changed how Ethereum reaches consensus, not how much data and computation fits in each block.

Before the Merge:

miners competed via hash power,
energy consumption was tied to mining economics,
issuance funded the PoW security budget.

After the Merge:

validators stake ETH to participate,
block production and finality follow PoS rules,
energy usage dropped dramatically because security no longer required massive computation.

The execution layer (smart contracts, transactions) continued operating, but the consensus “engine” underneath it changed.

2) Why Proof of Stake mattered economically

PoS reshaped Ethereum’s economic structure:

Issuance decreased relative to the PoW era because PoS security can be maintained with lower ongoing issuance.
Staking yield became a native return for participating in consensus.
The relationship between network demand and ETH supply tightened when combined with EIP-1559’s burn.

In simple terms, Ethereum’s monetary dynamics became more explicitly tied to platform usage and staking participation.

For a Virtual Ethereum Index, the Merge created new categories of index-relevant signals:

staking rate and validator participation,
staking yields and their drivers,
net issuance vs burn,
the evolving balance between security and monetary policy.

3) Security and decentralization debates

Every consensus model has tradeoffs. PoS changed Ethereum’s attack surface and economic incentives. Debates intensified around:

staking centralization (large pools and providers),
regulatory risk if staking becomes concentrated in specific jurisdictions,
MEV (maximal extractable value) and proposer/builder separation dynamics,
the role of client diversity and validator hardware requirements.

The Merge didn’t “solve” these issues, but it made them central. Ethereum’s path forward is as much about social and economic design as it is about code.

4) The Merge and the roadmap: why it was a prerequisite

Ethereum’s long-term scaling strategy increasingly centered on rollups and data availability improvements. PoS was important because:

it enabled new approaches to finality and coordination,
it reduced the energy narrative risk for mainstream adoption,
it simplified certain paths toward future upgrades.

In many ways, the Merge cleared a psychological and technical obstacle. After it, the community could focus on scaling and usability with a more stable consensus base.

5) The post-Merge reality: what changed immediately

Right after the Merge, users noticed:

the network continued functioning smoothly (a major success),
fee dynamics were similar (because capacity didn’t change),
energy narrative changed quickly,
staking continued, but withdrawals were not yet enabled (that would come later).

This last point is important. Staking was live, but staked ETH remained locked until the next major upgrade enabled withdrawals.

6) Cultural significance: Ethereum proves it can coordinate

The Merge also proved something about Ethereum’s social layer: the ecosystem could coordinate across:

multiple client teams,
exchanges and infrastructure providers,
application developers,
node operators and validators.

This coordination is itself a form of value. Platforms that can upgrade safely can adapt to new demands and threats. That adaptability is a key driver of long-term economic value.

7) What this era means for a Virtual Ethereum Index

From the standpoint of VEI (Virtual Ethereum Index), the Merge is a structural break in the time series. Any index that models Ethereum’s economics should treat “pre-Merge” and “post-Merge” as different regimes.

Metrics that gained importance post-Merge:

staked ETH and validator count as security indicators,
staking yield as a baseline “native rate” in the ecosystem,
net issuance (issuance minus burn) as a supply signal,
MEV dynamics as a fee and value extraction factor,
L2 adoption as the primary path to scale without bloating L1.

The Merge didn’t finish Ethereum’s story. It set the stage for the next major step: enabling staking withdrawals, further anchoring Ethereum as a mature PoS network. That arrives in 2023 with Shanghai/Capella–and it coincides with a rollup-centric scaling era that redefines what “Ethereum usage” looks like.

Reference: VEI.XYZ™

Index Notes for VEI

A useful way to read Ethereum’s history is to separate narrative from mechanics. Narratives bring users; mechanics keep them. For VEI, consider tracking a blend of (a) usage demand (fees, settlement volume, L2 activity), (b) supply/security structure (issuance, burn, staking participation, validator concentration), and (c) builder momentum (developer tools, audit density, open-source contributions). Over time, Ethereum’s “economic value” often shows up first in these structural indicators before it shows up in price.

Another practical tip: compare signals across cycles. When activity returns after a downturn and the ecosystem retains more users and more builders than the previous cycle, that’s compounding. When upgrades reduce friction (fees, UX, capital efficiency), adoption tends to follow. The index mindset is not to predict a single event, but to measure whether Ethereum’s platform economy is widening or narrowing across layers.

VEI Lens: A quick checklist

When you revisit this era later, ask: What new market did Ethereum enable (capital formation, trading, culture, scaling)? What new standard or upgrade reduced friction? What new risk emerged (security, governance, concentration), and how did the ecosystem respond? These three questions–market, standard, risk–help keep an index grounded in fundamentals rather than headlines.

Practical takeaway

If you are building dashboards for VEI.XYZ™, treat Ethereum like an economy with sectors: settlement, data availability, staking/security, consumer apps, and developer infrastructure. Each sector has different “health” indicators, and the composite is often more informative than any single metric such as price, transaction count, or TVL.

Additional VEI context

In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth.

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