Setting Expectations - The Daily Gwei #415
No, The Merge is not going to lower gas fees.
There is an unfortunate narrative that has been going around over the last few months that claims that The Merge will reduce gas fees on Ethereum layer 1. I want to make this very clear - The Merge will not have any material impact on layer 1 gas fees - the only tiny impact it may have on fees is that blocks are slightly faster (12 seconds instead of 12.9 seconds) but I doubt this has any real impact and I doubt that the user even feels it.
I’m actually quite worried about just how bad the fallout is going to be once The Merge happens and gas fees aren’t lowered as many people are expecting them to be. I can already imagine the amount of FUD (fear, uncertainty and doubt) that will be spread as a way to paint “eth2” as a failure even though The Merge will be the biggest upgrade in Ethereum’s history. This is a major reason why I’ve been trying to educate as many people as I can about the layer 2 ecosystem and the modular blockchain paradigm and how some of this is ready today for users to enjoy cheap transactions on.
Of course, regular Daily Gwei readers will know what I’m talking about above, but a quick refresher for newer readers: the way Ethereum is scaling is via a modular approach where layer 1 remains expensive to use (so it can remain decentralized and secure) and acts as a settlement layer for layer 2 where it’s cheap for users to transact on (and gets cheaper over time). Though in saying that, the Ethereum scaling roadmap is complex and if you’re a newer person to the ecosystem it can be quit difficult to follow along with it. So, given this context, it’s no surprise that people have clung onto the simple narrative of “eth2 will fix gas fees” and it also doesn’t help that many people with an audience keep perpetuating this narrative.
The thing is, the Ethereum fee market is a function of demand for limited blockspace and that demand is obviously through the roof. This leads to the very high gas prices that we all experience at layer 1 and the only time these prices go down is when network activity goes down. But there is so much to do on Ethereum that fees remain high even when the market is quiet - just look at how much gas the NFT ecosystem uses which has proven to be mostly detached from the broader crypto markets in terms of performance and activity. Though again, this is a nuanced topic and not something I expect newcomers to grasp immediately.
I’m obviously very much looking forward to The Merge for reasons I’ve outlined in the past but I’m also looking forward to it to see if I’m right about this narrative leading to a really bad outcome. Obviously I hope I’m wrong but I’ll keep educating about this issue as if I’m right because more people should be made aware of how Ethereum is scaling regardless of anything else. So, if you want to help me on this education quest, whenever someone asks you if The Merge will lower gas prices, just say no.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.