Ethereum Post-Merge Performance
Ethereum's transition to proof of stake changed its issuance, its holder base and the economics of its rollup ecosystem simultaneously. Several years on, the data allows a clearer verdict on which of the original theses held.
Consensus
Proof of stake
Energy use
-99%
Fee destination
Burn + validators
Issuance and the burn: conditional scarcity
Post-merge issuance is a fraction of its proof-of-work level, and the fee burn introduced by EIP-1559 removes ETH in proportion to demand for block space. Net supply therefore oscillates: heavy activity produces contraction, quiet periods produce mild inflation. Ethereum is best described as conditionally scarce rather than deflationary.
The important consequence is that ETH's monetary story is now a demand story. Any analysis that assumes automatic scarcity without checking mainnet fee revenue is incomplete.
Staking dynamics and the yield stack
Staked supply has grown steadily, with liquid staking tokens allowing capital to be simultaneously staked and deployed in DeFi. That improves capital efficiency and introduces reflexive risk: a large share of staking concentrated in a few providers creates correlated slashing and governance concerns, and leveraged staking loops can unwind quickly.
Yield is now a blend of consensus rewards and priority fees. Because priority fees track activity, staking yield is procyclical — it compresses precisely when it would be most useful as a floor.
- Track provider concentration alongside total staked supply
- Separate consensus yield from fee-driven yield
- Monitor validator exit queues during stress
Layer 2 growth moved activity, and revenue
Rollups now carry the majority of transactions, and cheaper data availability made that decisive. Users benefited immediately; mainnet fee revenue did not. Ethereum's economics increasingly depend on rollups paying for settlement and data rather than on end users transacting on L1.
For valuation, the question is whether that revenue scales with rollup usage fast enough to offset the migration. Watch total L2 transactions against blob fee revenue — divergence between them is the central open question in Ethereum's economic model.
What to monitor next
Three metrics carry the most information: net supply change over rolling 30-day windows, staked share with provider concentration, and blob fee revenue per unit of L2 activity. Together they describe whether Ethereum's scaling success is translating into value accrual at the base layer.
Conclusion
The merge delivered on energy, issuance and staking. The unresolved question is economic: rollups made the network usable at scale while shifting fees away from L1, so ETH's investment case now rests on settlement and data demand rather than retail gas fees.
Key risks
- • Staking concentration among a small number of providers
- • Rollup fee migration outpacing base-layer value capture
- • Leveraged liquid-staking loops unwinding in a drawdown
This report is provided for information only and is not investment advice. Cryptoassets are high risk and you may lose all the money you invest.
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