Ethereum’s Merge: Supply, MEV, Energy Use, and Layer 2 Implications

Summary

This retrospective discusses market and network implications of Ethereum’s 2022 transition from proof of work to proof of stake. It highlights the expected reduction in energy consumption and issuance, while noting that ETH’s net supply depends on network activity and fee burning. It cautions that deflation is not automatically beneficial: changing incentives can affect circulation, borrowing, and economic activity, so lower issuance alone does not establish a bullish price outcome.

The article also explains miner extractable value through transaction ordering and fee selection, and considers how validators and specialized block builders could change the process after the Merge. It argues that the upgrade did not directly solve scaling and that Layer 2 systems could remain important alongside planned base-layer changes. The piece presents figures and forecasts available at the time, but repeatedly acknowledges uncertainty around adoption, security, centralization, MEV revenues, and price effects; it is a discussion rather than a measured post-event market study.

Key ideas

• The Merge replaced proof of work with proof of stake and was expected to sharply reduce Ethereum’s energy use and issuance.
• ETH’s supply can be inflationary or deflationary depending in part on network activity and fee burning.
• Transaction ordering creates MEV incentives, and specialized block builders may reshape how validators assemble blocks.
• The Merge did not itself resolve scaling, so Layer 2 networks may remain part of Ethereum’s scaling approach.
• The article treats price and security consequences as uncertain rather than guaranteed outcomes.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.