The Ethereum Merge has officially happened — marking a historic shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This long-anticipated upgrade isn’t just a technical milestone; it’s a turning point for the entire blockchain ecosystem. Yet, despite its success, Ethereum continues to face persistent myths and misunderstandings.
In this deep dive, we’ll address and dismantle 15 of the most common misconceptions about Ethereum, based on insights from leading researchers like Justin Drake. Whether you're new to crypto or a seasoned participant, this guide will clarify Ethereum’s true role, economic model, and long-term vision.
The Core of Ethereum: A Settlement Layer for the Digital Economy
Ethereum’s mission is to become the settlement layer for the value internet — a decentralized foundation where global economic activity can be securely verified and finalized. This ambition has drawn both admiration and skepticism. But as the network evolves, many criticisms stem from outdated assumptions or fundamental misunderstandings.
Let’s break down the most widespread myths.
1. "The Merge Will Never Happen"
This claim has been repeated for years — often by skeptics who doubted Ethereum’s ability to execute such a complex transition. But as of September 15, 2022, at 14:42:42 UTC, the Merge was successfully completed.
Ethereum’s shift to PoS wasn’t theoretical. It was meticulously planned for over seven years and flawlessly executed. The network continues to operate securely, with lower energy consumption and enhanced scalability foundations.
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2. "Ethereum Will Never Succeed"
Critics have long argued that Ethereum would fail to deliver on its roadmap. Yet, time and again, Ethereum has proven resilient — launching major upgrades like EIP-1559, layer-2 scaling solutions, and now the Merge.
Today, Ethereum supports thousands of decentralized applications (dApps), from DeFi protocols to NFT marketplaces. Hundreds of developers are advancing rollup technologies like optimistic and zk-rollups, pushing execution efficiency to new levels.
The final major piece — sharding — is already in research phase, with proto-danksharding paving the way. Ethereum isn’t just surviving; it’s building the infrastructure for a scalable, secure digital economy.
3. "Ethereum Is Trying to Do Too Much"
Some claim Ethereum lacks focus because it hosts diverse applications — DAOs, ICOs, DeFi, NFTs. But this confuses the platform with its applications.
Ethereum itself is not a social network or an art marketplace. It’s the underlying settlement layer — much like how the internet supports email, video streaming, and e-commerce without being any one of them.
Just as TCP/IP doesn’t “do too much” by enabling countless services, Ethereum provides the base for programmable value transfer.
4. "ETH Can’t Be Both Money and a Smart Contract Platform"
A common critique suggests Ethereum must choose between being digital money or a computation platform. But in reality, these roles reinforce each other.
To serve as a global settlement layer, Ethereum needs immense economic security — measured in trillions of dollars. This security comes from ETH’s value as a monetary asset. The more valuable ETH becomes, the harder (and costlier) it is to attack the network.
In PoS, economic security is directly tied to staked ETH value. Therefore, ETH must succeed both as money and as a settlement mechanism.
5. "ETH Has Infinite Supply"
Unlike Bitcoin’s hard cap of 21 million, Ethereum does not enforce a maximum supply. However, this doesn’t mean supply is infinite.
Since EIP-1559, a portion of transaction fees is burned (destroyed permanently). When burn rates exceed new issuance from staking rewards, ETH becomes deflationary.
Historical data shows ETH has often been net deflationary post-Merge. Even with ongoing issuance, lost private keys and consistent burning create natural supply constraints — making runaway inflation highly unlikely.
6. "ETH Supply Is Unpredictable"
It’s true that Ethereum’s monetary policy evolved through social consensus (e.g., reducing block rewards pre-Merge). But that era is ending.
Post-Merge, ETH issuance is now market-driven:
- Issuance depends on staking demand and yield requirements
- Destruction depends on network usage and gas fees
Tools like Ultrasound.money allow users to model future supply using these two variables — bringing transparency and predictability.
7. "Ethereum Is Run by a Staking Oligarchy"
No — validators do not control governance. Unlike some blockchains (e.g., Tezos), Ethereum has no on-chain voting mechanism tied to stake.
Consensus operates in two layers:
- Machine layer: Validators process blocks
- Social layer: Humans decide protocol upgrades
Just like Bitcoin, changes require broad community agreement. Validators follow rules; they don’t make them.
8. "PoS Makes the Rich Richer"
In PoS, everyone earns the same APR, regardless of stake size. Whether you stake $100 or $1 million worth of ETH, your relative return is identical.
Moreover, staking pools like Lido and Rocket Pool lower entry barriers — allowing small holders to earn comparable yields to large operators. This democratizes access far more than PoW, where mining favors those with massive capital for hardware and energy.
9. "Deflation Is Bad for the Economy"
This argument assumes all money functions the same. But there are two types:
- Debt money (e.g., USDC): Should be slightly inflationary to encourage spending
- Collateral money (e.g., ETH): Should be deflationary to reduce risk and increase purchasing power
ETH is optimized as collateral — used in DeFi lending and staking. Deflation strengthens its role here by increasing scarcity and long-term value retention.
10. "Higher ETH Price Means Higher Gas Fees"
Gas prices are denominated in gwei (ETH), not USD. So even if ETH rises in dollar value, gas fees can still drop — especially with layer-2 scaling.
For example:
- 1 ETH = $100 → 0.01 ETH gas = $1
- 1 ETH = $10,000 → 0.0001 ETH gas = $1
Layer-2 solutions further decouple user costs from mainnet congestion. As rollups mature, transaction costs will trend toward pennies — regardless of ETH’s price.
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11. "ETH Is a Security"
No major jurisdiction classifies ETH as a security. The U.S. SEC has informally stated ETH is not a security, while the CFTC recognizes it as a commodity.
CME Group even lists ETH futures — which only commodities qualify for. With over seven years since launch and no enforcement action, the statute of limitations further weakens this argument.
Even if one country bans ETH trading, decentralized exchanges ensure continued access.
12. "Scalability Will Reduce Fee Burns"
While individual transactions may cost less post-scaling, total volume increases due to induced demand — similar to how wider highways attract more traffic.
Since genesis, Ethereum has scaled ~50x in capacity — yet fee income grew from ~$10/day to millions per day. More efficiency enables more usage, sustaining or increasing burn rates.
13. "ETH Is Just a Tech Stock"
While Ethereum generates cash flow (via fees), ETH is more than equity. It’s collateral, stake, and governance-enabling asset — none of which apply to traditional stocks.
Its valuation includes both cash flow and monetary premium — especially as more ETH gets locked in DeFi and staking.
14. "Ethereum’s Narrative Keeps Changing"
From ICOs to DeFi to NFTs — narratives shift because innovation thrives on Ethereum. But the core mission remains unchanged: secure settlement for digital value.
Like early internet narratives shifting from email to social media, public perception evolves before recognizing the foundational layer.
15. "Ultra Sound Money Is Cringe"
“Ultra Sound Money” mocks Bitcoin’s “Sound Money” — playing on deflationary mechanics. Critics call it cringe or stolen meme culture.
But memes evolve. “Sound money” itself originated from gold coins ringing when tested — hardly serious by modern standards.
Memes spread ideas. “Ultra Sound Money” has galvanized a movement around ETH’s deflationary potential — proving its cultural resonance.
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Frequently Asked Questions (FAQ)
Q: Is Ethereum now fully scalable after the Merge?
A: The Merge improved energy efficiency and laid groundwork for scalability, but full scaling comes with future upgrades like sharding and rollups — expected over the next few years.
Q: Does staking ETH give you voting power in governance?
A: No. Stakers secure the network but do not vote on protocol changes. Governance remains off-chain and community-driven.
Q: Can ETH ever become deflationary permanently?
A: Yes — when daily ETH burns exceed new issuance from staking rewards. This has already occurred during periods of high network activity.
Q: How does EIP-1559 affect users?
A: It makes fees more predictable by burning base fees and introducing dynamic pricing, improving user experience and contributing to potential deflation.
Q: Will gas fees disappear entirely?
A: Not entirely — but they will become negligible thanks to layer-2 networks processing bulk transactions off-chain.
Q: Is Ethereum safer after transitioning to PoS?
A: Yes — attacking requires owning ~⅓ of total staked ETH (hundreds of billions USD), making large-scale attacks economically unfeasible.
Final Thoughts
The Merge wasn’t an endpoint — it was a launchpad. Ethereum continues evolving toward greater scalability, security, and sustainability.
By addressing these misconceptions, we see a clearer picture: Ethereum is building the backbone of a decentralized digital economy — powered by innovation, economics, and community consensus.
Keywords: Ethereum Merge, Proof-of-Stake, ETH staking, EIP-1559, deflationary cryptocurrency, layer-2 scaling, blockchain security, digital settlement layer