Problems and misconceptions about Ethereum after the Merge

The Merge of Ethereum has happened, but many are left with questions about what will change now and what Ethereum problems will remain. Let’s look at the most famous and popular ones.

Stacking of 32 ETH is required to start the node

The Ethereum team states that this is not the case. Anyone can sync their own verified copy of Ethereum (i.e., start a node). ETH is not required to do this, not before the merge, not after the merge, ever.

There are two types of Ethereum nodes: nodes that can offer blocks, and nodes that do not.

Nodes that offer blocks are only a small fraction of the total number of Ethereum nodes. This category includes Proof-of-Work (PoW) mining nodes and Proof-of-Shares (PoS) validation nodes. This category requires the allocation of economic resources (such as hash-powered GPUs for proof-of-work or blocked (zapped) ETH for proof-of-share) in exchange for the ability to offer the next block from time to time and receive a reward for the protocol.

Other nodes in the network (i.e., most) do not need to allocate any economic resources other than a consumer-grade computer with 1-2 TB of available memory and an Internet connection. These nodes do not offer blocks, but they still play an important role in protecting the network by holding everyone who offers blocks accountable by listening for new blocks and verifying their validity according to the network’s consensus rules. If the block is valid, the node continues to distribute it across the network. If a block is invalid for any reason, the node’s software will ignore it as invalid and stop distributing it.

Running a node that does not produce blocks is possible for anyone under any consensus mechanism (proof of work or proof of share); this is highly recommended for all users, if they have the means. Running a node is extremely valuable to Ethereum and provides additional benefits to anyone working with it, such as increased security, privacy and resistance to censorship.

The ability for anyone to run their own node is necessary to keep the Ethereum network decentralized.

The merger will not lower gas charges

The merger was a change in the consensus mechanism, not an expansion of network capacity, and was never intended to reduce gas charges.

Gas charges are a product of network demand relative to network capacity. The merger abandoned the use of proof of work, moving to proof of share to reach consensus, but did not significantly change any parameters that directly affect network capacity.

The merger did not speed up transactions

Despite some minor changes, transaction speeds at level 1 are now essentially the same as they were before the merge.

Historically, with proof-of-work, the goal was to create a new block every ~13.3 seconds. In proof-of-stake, blocks are created exactly every 12 seconds, each of which gives the validator a chance to publish the block. In proof-of-stake, blocks are created about 10% more often than in proof-of-work. This was a fairly minor change, and is unlikely to be noticed by users.

The Merge does not allow withdrawals from staking

Withdrawals with Staking are not yet included in The Merge. The next update to Shanghai will allow withdrawals from staking.

ETH bets and staking rewards are still locked with no withdrawal options. Withdrawals are scheduled for the upcoming Shanghai upgrade.

Validators will not receive any rewards in ETH until the Shanghai upgrade, when withdrawals will be enabled

The Ethereum protocol issues ETH as a reward to validators for contributing to consensus. At the consensus level, newly issued ETHs are counted, where the validator has a unique address where its ETH and protocol rewards are stored. This ETH is locked until the Shanghai update.

ETH at the execution level is accounted for separately from the consensus level. When users execute transactions on the main Ethereum network, ETH must be paid to cover the gas, including the fees to the validator. These ETH is already in the execution layer, not reissued by the protocol and immediately available to the validator.

When withdrawals are allowed, all stackers will immediately start selling their ETH

The number of validator withdrawals is limited for security reasons. Once the Shanghai update allows withdrawals, all validators will be interested in withdrawing their betting balance above 32 ETH, as these funds are not added to income and are simply locked out. Depending on the annual interest rate (determined by the total amount of ETH bets placed), they may be interested in withdrawing from their validator(s) to get their entire balance back or possibly placing even more, using their rewards to earn more income.

The frequency of full validator exits is limited by the protocol, so only six validators can exit per epoch (every 6.4 minutes, i.e. 1,350 per day, or only ~43,200 ETH per day out of over 10 million ETH). This speed limit is adjusted based on the total amount of ETH supplied and prevents a massive outflow of funds. It also prevents a potential attacker from using his bet to commit fraud.