The Ethereum Merge: "New" Token and Gas Fees, Explained

The Ethereum merge will have a huge impact on the blockchain. However, gas fees may not be lower right away. Here's everything we know about the merge.

Ruchi Gupta - Author

Aug. 30 2022, Updated 2:58 p.m. ET

Ethereum founder Vitalik Buterin
Source: Getty Images

Investors have been long waiting for the Ethereum “merge” event that's scheduled to happen in mid-September. Will there be a new Ether token? Will Ethereum gas fees be cheaper?

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Vitalik Buterin-led Ethereum, among the oldest blockchains, has grown to become the preeminent DeFi, NFT, and Web3 platform. Despite its status, however, it has a number of shortcomings, and these are being addressed through upgrades to the network.

One major issue is that the blockchain can only handle a limited number of transactions, which congests the network and drives up gas fees. Another problem is that Ethereum uses huge amounts of energy, which raises concerns about its environmental impact.

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The Ethereum merge has been a work in progress.

Ethereum has gone through multiple upgrades in recent years to correct its various shortcomings. It's currently based on the proof-of-work (PoW) mechanism, the same one Bitcoin uses. The problem with PoW is that it’s very energy-intensive compared with the proof-of-stake (PoS) mechanism used by Cardano and Solana.

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Years ago, the Ethereum team created a parallel network that runs on PoS to test how Ethereum operations could work there. As the tests have been mostly successful, the team now plans to merge the old Ethereum system with the PoS network. The blockchain that Ethereum will switch to is called the Beacon Chain.

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Nobody knows the Ethereum merge date yet.

Some investors speculate the merge might happen in summer or fall 2022, though the Ethereum team hasn’t set an official date yet. Once the merge is completed, Ethereum mining would become obsolete.

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What delayed the Ethereum merge?

The Ethereum community has been waiting for the merge for years, but it was delayed because of the rigorous testing needed before the update is activated. The blockchain hosts assets worth billions of dollars and supports critical operations. A bungled update could have catastrophic effects on the network and projects that rely on it. Previous test merges showed that there were minor bugs in the upgrade, which kept the developers from moving forward.

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Will the Ethereum merge create a new token?

No new token will arise from the merge. In fact, investors should watch out for scammers telling them that they need to swap their old Ether coins for new coins. The Ethereum team has actually dropped the “Eth2” reference to avoid confusion over the upgrade creating a new token. Those who already hold Ether tokens don't have to worry about having to buy new tokens or convert their current ETH holdings to new tokens.

Will the Ethereum merge lower gas fees?

The upgrade isn’t expected to have any immediate impact on Ethereum gas fees. However, once Ethereum completes the merge, the transaction fees on the network should gradually decline. PoS blockchains such as Solana and Polygon are known to have some of the smallest and cheapest gas fees. So, it's likely Ethereum will have fees that low, but it will take some time before you will see gas fees as low as those blockchains.


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