Ethereum’s transition from proof-of-work to proof-of-stake — known as The Merge — marked a pivotal moment in blockchain history. To unpack the significance of this shift, we hosted an in-depth conversation with experts from Figment, a leading staking infrastructure provider, and Sreeram Kannan, Ethereum researcher and founder of the Eigenlayer Project. This session explored Ethereum’s origins, its evolution, and what the future holds for stakers, developers, and the broader Web3 ecosystem.
The Genesis of Ethereum: Beyond Bitcoin
Ethereum wasn’t conceived to compete with Bitcoin — it was built to expand what blockchains could do. While Bitcoin introduced decentralized digital money, Ethereum introduced programmability through smart contracts.
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As Ben from Figment explained, Ethereum's core innovation was adding a smart contract platform on top of blockchain technology. This allowed developers to build decentralized applications (dApps) ranging from DeFi protocols to NFT marketplaces — all running without centralized control.
But what truly fueled Ethereum’s growth was its open-source nature. By inviting global developers to build on its foundation, Ethereum transformed from a single protocol into a thriving innovation hub. The combination of programmability and open access became the spark — and the gasoline — that ignited the Web3 revolution.
Trust Without Identity: Ethereum’s Value Proposition
Sreeram Kannan offered a compelling perspective: Ethereum separates trust from innovation.
Before Ethereum, every new blockchain application needed its own consensus mechanism and trust network. This was inefficient and unsustainable. Ethereum solved this by providing a shared, decentralized trust layer. Developers could now focus on building applications, while Ethereum ensured the rules were enforced transparently.
This shift enabled the rise of the pseudonymous economy — a world where contributors don’t need to reveal their identity, legal status, or reputation to participate. As long as the code is sound, the application runs as intended. This trustless environment has empowered anonymous developers, grassroots projects, and global collaboration at an unprecedented scale.
Why Proof-of-Stake? The Evolution of Consensus
Ethereum began with proof-of-work (PoW), following Bitcoin’s proven model. PoW provided a reliable foundation for a permissionless network. However, it came with major drawbacks: high energy consumption and limited scalability.
The move to proof-of-stake (PoS) was driven by three key goals:
- Reduce environmental impact
- Improve network security
- Enable more sophisticated incentive mechanisms
Unlike PoW, where miners compete using computational power, PoS relies on validators who stake ETH as collateral. This shift replaces energy-intensive mining with economic accountability. Misbehaving validators risk losing their stake — a powerful disincentive against attacks.
Sreeram highlighted that Ethereum’s PoS design is uniquely robust. It supports dynamic availability, meaning the network can continue operating even if a large portion of validators go offline. Only if more than one-third of validators fail does the chain risk stalling — and even then, recovery is possible through social coordination.
Moreover, Ethereum’s PoS introduces slashing conditions: if a validator acts maliciously, honest participants can submit proof and have them penalized. This means even a minority can protect the network from a dishonest majority — a rare and powerful feature in consensus design.
Scaling Ethereum: The Road to Danksharding
Scalability remains one of Ethereum’s biggest challenges. The roadmap focuses on a rollup-centric strategy, where most computation happens off-chain, while only transaction data is posted to Ethereum.
This approach reduces the burden on individual nodes, preserving decentralization while boosting throughput. However, data availability becomes critical: nodes must verify that off-chain data is publicly accessible so users can challenge fraudulent activity.
Two major upgrades are set to transform this:
- EIP-4844 (Proto-Danksharding): Introduces “blobs” of data that reduce costs for rollups.
- Full Danksharding: Will increase Ethereum’s data bandwidth from 80 KB/s to 1.3 MB/s — a 20x improvement.
These upgrades will make Layer 2 solutions faster and cheaper, accelerating mass adoption of dApps, gaming, and identity systems.
New Roles in the Post-Merge Era
The Merge didn’t just change consensus — it reshaped the economic and technical roles within Ethereum.
Proposer-Builder Separation (PBS)
Previously, validators both built and proposed blocks. Now, builders specialize in constructing optimized blocks (often maximizing MEV — Maximum Extractable Value), while proposers simply select which block to include.
This separation enhances decentralization by ensuring validators don’t need expensive hardware. Even home stakers can participate as proposers, while competition among builders keeps the system fair.
Liquid Staking: Solving Capital Illiquidity
Staking ETH traditionally locks up capital for long periods. Liquid staking solves this by issuing derivative tokens (like stETH) that represent staked ETH and can be traded or used in DeFi.
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While liquid staking improves capital efficiency, it introduces new risks. If too many stakers rely on a few large providers, it could threaten censorship resistance. Decentralization — essential for liveness — isn’t directly measured by the protocol, making this an ongoing area of research and concern.
Frequently Asked Questions (FAQ)
Q: What happens to my staked ETH after The Merge?
A: Your staked ETH continues earning rewards through validation. However, withdrawals were not enabled immediately after The Merge. They were unlocked later via the Shanghai upgrade in 2023.
Q: Is it safe to stake ETH?
A: Staking is secure when done through reputable validators. Risks include slashing for downtime or misbehavior, but these are minimized by professional staking services with robust infrastructure.
Q: Does it matter who I stake with?
A: Yes. Choosing a reliable staking provider ensures higher uptime, better rewards, and protection against slashing. Trust and track record are critical factors.
Q: Can I unstake my ETH at any time?
A: Yes — since the Shanghai upgrade. Validators can now withdraw their staked ETH and accrued rewards, adding much-needed flexibility to staking.
Q: What is MEV and why does it matter?
A: MEV (Maximum Extractable Value) refers to profits validators or builders can earn by reordering transactions. PBS helps democratize MEV and reduce its negative impacts like front-running.
Q: How does liquid staking affect Ethereum’s security?
A: It maintains economic security as long as sufficient ETH is at stake. However, centralization in liquid staking pools could weaken censorship resistance — an important trade-off being monitored by researchers.
The Future Is Staked
Ethereum’s journey from PoW to PoS was never just about energy savings — it was about building a more secure, scalable, and inclusive digital economy. With innovations like proposer-builder separation, liquid staking, and danksharding on the horizon, Ethereum continues to evolve as the foundational layer for decentralized innovation.
Validators, developers, and users all play vital roles in this ecosystem. Whether you're staking your first 32 ETH or building the next breakthrough dApp, you’re contributing to a trustless future where innovation thrives without permission.
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