What does The Merge mean for NFTs?

The Merge switched Ethereum's Proof-of-Work consensus algorithm to Proof-of-Stake. Therefore, there will be no more mining, which is the process of solving an algorithm to create new blocks containing transactions. Instead, network validators—participants who lock a certain amount of the network's token (in this example, ETH) to be eligible to be chosen—propose the new blocks.

When a collection is being minted, NFTs are renowned for requiring a significant amount of block space and transaction speed, which caused issues for Ethereum under PoW. In this post, we'll examine if PoS has improved the network's metrics to assist it cope with spikes in demand.

Block Time

Under PoW, the block time (the amount of time it takes to create a block with transactions) depended on the network's hashrate and the level of difficulty determined by the algorithm used to validate the transactions. As a result, this figure fluctuated between 12 and 15 seconds, not being a consistent value. Thus, there would be substantial variation in the number of daily blocks (and consequently the number of transactions that the network could handle.)

These situations altered after PoS was introduced. The block time has changed and is now fixed at 12 seconds (time slots). Additionally, these intervals of time are organized into 32-slot epochs. As shown in the chart below, this results in stable block output.

The Merge occurred on September 13, and it is evident that since then, both the number of daily blocks and the block time have increased. As a result, there was more available block space for transactions.

The quantity of transactions contained within a block, however, varies. Different transaction types use up different amounts of block space. For instance, transferring tokens between wallets requires less space than a sophisticated smart contract interaction.

Due to the increased number of blocks made available by the switch to PoS and the more reliable lower limit, it reveals a minor increase in daily transactions (around 1.1 million transactions).

Gas Price

The price of gas is another variable that matters for NFT transactions. This represents the portion of the user's cost for sending a transaction. The demand for space inside the network's blocks has a direct impact on its value. The price increases in direct proportion to demand.

There is typically a huge flow of users wanting to send a transaction in a short amount of time when an NFT collection is minting its NFTs (as the number of items is limited). As the block size is constrained in this case, the user will have to pay extra to broadcast a transaction.

This situation remained the same after the most recent Ethereum update because the network's block size was not upgraded in any meaningful way.

Before and after The Merge, there was no discernible difference in the demand for block space; the gas price remained constant. The “The Surge” improvement, which is expected to make a big difference in this scenario, will be implemented in 2023. It will introduce network “sharding” to allow blocks to be processed concurrently, expanding the network's supply of block space.

Ethereums Upgrades Roadmap – Source: Twitter

According to the roadmap for impending Ethereum upgrades, all future updates will concentrate on scalability and speed enhancements to make Ethereum a high-throughput blockchain.

Key Takeaways

The PoS consensus algorithm's adoption by one of the top public blockchains was the key modification made by The Merge. This decreased the network's energy use while bringing consistency to Ethereum's block time.

Even while The Merge didn't significantly alter the Ethereum blockchain's overall metrics, it was an essential step toward raising the transaction outputs that The Surge will bring.

The quantity of NFT transactions did not grow following The Merge on September 13th, so the NFT sector did not test this new Ethereum setup to see how it would handle the increased demand pressure.

However, since there is more accessible block space, the network should theoretically operate better than it did under the prior circumstance. When the following much anticipated collection drop occurs remains to be seen.