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An Event Study of the Ethereum Transition to Proof-of-Stake

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  • Elie Kapengut
  • Bruce Mizrach

Abstract

On September 15, 2022, the Ethereum network adopted a proof-of-stake (PoS) consensus mechanism. We study the impact on the network and competing platforms in a two month event window around the Beacon chain merge. We find that the transition to PoS has reduced energy consumption by 99.98%. Miners have not transformed into validators, and total block reward income (in USD) has fallen by 97%, though transaction fees (in ETH) for Ether have increased nearly 10%. The Herfindahl index for the top 10 is 1,009; the network is 19% less concentrated after the merge. Ethereum supply growth has been deflationary since the merge. The time between consecutive blocks is now steady at 12 seconds and transactions per day are up 7.0%. On Polygon, Matic fees rose but token fees fell. Polygon also slows, processing 3.3% fewer transactions per day. Solana's fees fall by $0.0003, and transactions per day are down 48%. Stablecoin transfer volumes fall on Ethereum and Polygon, but rise on Solana.

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  • Elie Kapengut & Bruce Mizrach, 2022. "An Event Study of the Ethereum Transition to Proof-of-Stake," Papers 2210.13655, arXiv.org, revised Feb 2023.
    • Handle: RePEc:arx:papers:2210.13655
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    References listed on IDEAS

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    1. Bruce Mizrach, 2022. "Stablecoins: Survivorship, Transactions Costs and Exchange Microstructure," Papers 2201.01392, arXiv.org, revised Feb 2023.
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    Cited by:

    1. Luyao Zhang & Fan Zhang, 2023. "Understand Waiting Time in Transaction Fee Mechanism: An Interdisciplinary Perspective," Papers 2305.02552, arXiv.org.
    2. Valerio Mandarino & Giuseppe Pappalardo & Emiliano Tramontana, 2023. "Proof of Flow: A Design Pattern for the Green Energy Market," Future Internet, MDPI, vol. 15(9), pages 1-23, September.
    3. Tao Yan & Shengnan Li & Benjamin Kraner & Luyao Zhang & Claudio J. Tessone, 2024. "Analyzing Reward Dynamics and Decentralization in Ethereum 2.0: An Advanced Data Engineering Workflow and Comprehensive Datasets for Proof-of-Stake Incentives," Papers 2402.11170, arXiv.org.
    4. Casey Watters, 2023. "Digital Gold or Digital Security? Unravelling the Legal Fabric of Decentralised Digital Assets," Commodities, MDPI, vol. 2(4), pages 1-12, October.
    5. Namryoung Lee, 2023. "The Relationship between a Company’s Cryptocurrency Holdings and Its Sustainable Performance—With a Focus on External and Internal Financial Issues and Cash," Sustainability, MDPI, vol. 15(23), pages 1-15, November.
    6. Tanus Bikram Malla & Abhinav Bhattarai & Amrit Parajuli & Ashish Shrestha & Bhupendra Bimal Chhetri & Kamal Chapagain, 2022. "Status, Challenges and Future Directions of Blockchain Technology in Power System: A State of Art Review," Energies, MDPI, vol. 15(22), pages 1-26, November.
    7. Yan, Tao & Li, Shengnan & Kraner, Benjamin & Zhang, Luyao & Tessone, Claudio J., 2024. "Analyzing Reward Dynamics and Decentralization in Ethereum 2.0: An Advanced Data Engineering Workflow and Comprehensive Datasets for Proof-of-Stake Incentives," OSF Preprints 6ceuz, Center for Open Science.

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