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Understanding The Merge: ETH’s latest upgrade

By Carine Lee and Peter Henn

Edited by Charlie Mellor


An ether (ETH) coin with forks on a motherboard
The Ethereum blockchain switched to a proof-of-stake model in September 2022 – Photo: Shutterstock

As philosopher George Santayana put it: “To know your future, you must know your past.” So to understand what the Ethereum blockchain upgrade known as The Merge was all about, you need to understand its history.

You should also be aware that the world of crypto can be rather unpredictable, so – more than three months after it happened – we still don’t really know what sort of impact The Merge has had, especially when we consider the market crash caused by the collapse of the FTX (FTT) exchange in November 2022. 

The Ethereum blockchain was launched in 2015 by co-founders Vitalik Buterin, Gavin Wood, Charles Hoskinson and Anthony Di Iorio. Its native cryptocurrency is ether (ETH).

ETH to US dollar chart

The blockchain went through a hard fork in July 2016, creating Ethereum Classic (ETC), a continuation of the original blockchain, and what is now the Ethereum blockchain (ETH).

The hard fork came about when the blockchain’s participants disagreed over how to respond to a hack of the decentralised autonomous organisation (DAO) that resulted in the theft of 3.6 million ether coins.

The Merge is the Ethereum blockchain’s latest upgrade, and went live on 15 September 2022. On 24 November, it was revealed that the system would go through another upgrade, called Shanghai, at an unspecified future date which Decrypt suggested could be in the spring of 2023.

Meanwhile, in December 2022, Visa announced a proposal for people to be able to make automatic ETH payments direct from their crypto wallets. 

What is a hard fork?

In simple terms, a hard fork is a blockchain network upgrade that requires all nodes or users to upgrade to the latest version of the protocol’s software.

A hard fork may be initiated by developers, or by members of a crypto community who have grown dissatisfied with what is offered by existing blockchain implementations.

Cardano’s Vasil hard fork, for example, was designed to make the network perform faster and better, while helping it to scale up and ultimately increase the price of ADA.

ADA to US dollar chart

What is The Merge?

The Ethereum blockchain completed The Merge on 15 September 2022, which saw the current Ethereum mainnet integrated with the Beacon Chain proof-of-stake (PoS) system that had been running as a testbed since 2020.

Ethereum Classic, however, has no plans to convert to the proof-of-stake system.

The Merge marks the end of the proof-of-work mechanism for Ethereum. The transition to proof-of-stake, which promises future scaling upgrades for the platform, will greatly reduce Ethereum’s energy consumption and boost transaction speeds dramatically.

The integration of the Beacon Chain (a name which was dropped following The Merge) was an essential precursor to the upcoming scaling upgrades, such as sharding – the process of splitting a database horizontally to spread the load, which will turbocharge the speed of transactions on the Ethereum blockchain. When it is implemented some time later in 2023, sharding will increase transaction times from 12 to 25 transactions per second (tps) to 100,000 tps.

On 6 September 2022, Ethereum’s founder, Vitalik Buterin, retweeted a message from Twitter user terence.eth about the news that the Bellatrix upgrade, designed to prepare the blockchain for The Merge, had gone live. He also said he expected The Merge to take place at some point between 13 and 15 September.

On 7 September, news broke that Swiss bank SEBA had made ETH staking available to its customers. On 9 September, the news emerged that the Kiln, Ropsten and Rinkeby testnets – which had supported the work being carried out over the previous few months – would close.

By 12 September, Google had installed a counter on its Ethereum Merge search page that suggested The Merge could take place in the early hours of 15 September. The change to PoS eventually took place at 06:43 UTC on 15 September 2022 – and finalised a few minutes later, which was welcomed by Buterin on Twitter

Shortly after The Merge, ETH was worth about $1,620 and had a market cap of roughly $195bn. On 16 September, though, it was worth about $1,475, with a market cap of around $180bn. By 20 September, it had fallen even further and was worth about $1,360, giving it a market cap of around $166bn.

As of 22 September, it was down to around $1,275, with a market cap of around $155bn. By the following day, it had gone back up to around $1,289, while on 26 September 2022 it was trading at around $1,312, with a market cap of just over $160bn.

By 30 September, it had recovered somewhat to around $1,345, with a market cap of around $164.6bn, while a week later, on 7 October 2022, it was trading at around $1,355, with a market cap of roughly $166bn. 

By 14 October 2022, it was worth around $1,320, and its market cap was around $162bn. A week later, despite the news that investment firm Fidelity was to offer ETH trading to its customers, it had fallen further to about $1,280 and had a market cap of around $156bn. 

Late October saw something of a recovery for ETH with the news that Google was to launch a node-hosting service helping it break through $1,500 for the first time since the day of The Merge. This news, coupled with crypto enthusiast Elon Musk’s takeover of Twitter, saw ETH rallying to a high of $1,652.38 on 29 October 2022.


65,517.85 Price
-1.460% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00


0.12 Price
-10.370% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872


3,432.17 Price
-4.590% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00


0.50 Price
+0.680% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

Ethereum co-founder Vitalik Buterin’s announcement that an updated roadmap would feature a new stage, called The Scourge – designed to deal with problems relating to the amount of crypto extracted whenever blocks are added to the blockchain – then saw it reach a high of $1,661.33 on 4 November 2022.

Not even the latest ETH developments, however, could save the crypto from being hit by the market collapse that followed the news that Binance (BNB) was set to buy rival exchange FTX, only for it to make a U-turn on the deal after carrying out due diligence checks, hitting confidence in FTX and leading it to file for bankruptcy on 11 November.

The news sent ETH plummeting to a low of $1,083.29 on 9 November 2022, before it recovered to $1,341.79 the following day and then dropped to around $1,285 by 9 December. On 14 December, it reached its highest price since the fall over FTX when it was worth $1,346.17, but it slumped to close the year at $1,194.20 before reaching around $1,335 on 9 January 2023.  

It is worth noting that, according to data from Ultra Sound Money, ETH’s issuance rate has dropped considerably since The Merge. 

What next after The Merge?

While The Merge was highly anticipated by investors and developers, Ethereum’s existing miners weren’t too happy about the change to proof-of-stake. After all, they stood to lose out financially as a result of the change.

It was no great surprise, then, to learn that a group of miners had teamed up to create ETHW, which is basically the forked version of ether. This will allow people to earn money from a version of ETH.

On 12 September 2022, ETHW Core – the group behind the proposed new fork – tweeted that the crypto’s mainnet would go live within 24 hours of The Merge. 

This was confirmed by a tweet not long after The Merge went live, prior to which it posted a list of mining pools. The mainnet went live and, on 16 September 2022, the new version of the coin was worth about $14.15, according to CoinMarketCap.

Over the next few days, though, ETHW suffered a so-called replay attack, sending the price down to around $6.95 by 20 September. By 22 September, it was worth about $5.90, and it recovered a little to around $6.20 on 23 September. The next day, it surged to reach a high of $13.78, before dropping back down to around $10.28 on 26 September 2022.

By 30 September 2022, the price had recovered to about $12.30 before dropping back over the following week to around $7.45. By 14 October, ETHW was trading at $7.44, and it fell further over the next week to below $6.

After that, ether’s price rise helped push its offshoot up to $7.59 on 26 October 2022 before it dropped to stand at around $5.94 on 7 November. The market collapse following the Binance/FTX takeover debacle saw it trade at a low of $3.58 on 9 November, before recovering to $4.60 on 10 November.

It then dropped to an all-time low of $3.13 on 22 November before recovering to trade at about $4 on 2 December and then falling to around $3.05 on 3 January before recovering to about $3.35 on 9 January 2023. It will be worth noting what further developments take place regarding ETHW. 

Regulatory concerns

One potential unintended consequence of The Merge became apparent when court papers filed by the US Securities and Exchange Commission (SEC) seemed to suggest it considered ETH to be potentially under its jurisdiction.

Documents in the case against crypto trader Ian Balina said: “ETH contributions were validated by nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.”

Earlier, SEC chair Gary Gensler told reporters that the change to proof-of-stake could give more credence to the belief that ETH was a security. 

In another partially related piece of Ethereum news, papers filed against former FTX boss Sam Bankman-Fried by the United States Commodity Futures Trading Commission (CFTC) on 13 December 2022 said that it considered ETH to be a commodity alongside other cryptos.

The post-Merge downturn was explained by co-founder Joe Lubin, who argued that poor macroeconomic conditions had played a part, describing it as a “tail that is being wagged by a very sick dog”.

The Ethereum upgrade also brings with it certain other risks – for example, there could be teething problems with the new proof-of-stake mechanism. If that were to happen, the reputational loss to Ethereum could be massive and might even trigger a significant market crash.

It could be that problems with The Merge could lead to a significant liquidity drain from decentralised finance (DeFi) projects, or that people could end up falling prey to the likes of airdrop or support scams. Talking of scams, most, if not all, non-fungible tokens (NFTs) are based on Ethereum, so people might have to be careful about fake NFTs coming onto the market. 

There may also be the worry that, without proof-of-work, Ethereum could become just another PoS blockchain. While the native coins of other leading PoS chains including Cardano (ADA), Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Tron (TRX) and Tezos (XTZ) have all dropped in price over the last three months, we will have to see how they respond to a post-Merge market, especially if and when things recover from the FTX-inspired crash.  

Markets in this article

23.116 USD
-2.876 -11.300%
Ethereum / USD
3432.17 USD
-165.27 -4.590%
Avalanche / USD
26.7092 USD
-3.4933 -11.710%
Polkadot / USD
5.7669 USD
-0.6615 -10.360%
Solana / USD
135.9048 USD
-13.8482 -9.300%

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