Ethereum continues to inch closer to one of the most anticipated upgrades in blockchain history. On July 7, the network successfully completed its second full-scale rehearsal of The Merge—the pivotal transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS)—on the Sepolia testnet. With two of three planned testnet merges now complete, including the earlier successful Kiln test, the final rehearsal on Goerli remains the last major checkpoint before the mainnet transition.
While the technical roadmap progresses steadily, a curious trend has emerged: despite growing total staked ETH reaching record highs, daily ETH staking volume has declined over the past two months. What does this mean for Ethereum’s future? Is user enthusiasm waning, or are market dynamics and strategic patience reshaping participation?
Let’s explore the current state of Ethereum’s upgrade journey, the economic incentives driving staking behavior, and how new liquidity solutions are making PoS participation more accessible than ever.
Ethereum’s Three-Phase Upgrade: The Road to Scalability
Ethereum stands as the most influential smart contract platform in the blockchain space. With over 550,000 token contracts, dominant DeFi and NFT ecosystems, and stablecoins like USDT and USDC anchored on its network, Ethereum's role as the backbone of decentralized applications is undisputed.
Yet, its success has exposed limitations—most notably network congestion, high gas fees, and slow transaction finality. During peak usage, simple transactions can cost hundreds of dollars in gas fees, undermining usability and mass adoption.
To solve these challenges, Ethereum is undergoing a fundamental transformation through a three-phase upgrade roadmap:
1. Beacon Chain (Launched December 2020)
The foundation of Ethereum’s PoS future, the Beacon Chain introduced staking mechanics allowing users to deposit 32 ETH to become validators. Since launch, it has operated in parallel with the PoW mainnet, building consensus strength without disrupting existing operations.
👉 Discover how staking rewards are shaping Ethereum’s future economy.
2. The Merge (Expected 2025)
This phase will merge the current execution layer (formerly ETH 1.0) with the consensus layer (Beacon Chain), officially ending energy-intensive mining. Once complete, Ethereum will run entirely on PoS, drastically reducing energy consumption by over 99%.
3. Shard Chains (Post-Merge)
Designed to enhance scalability, shard chains will split the network into 64 parallel chains, increasing throughput and reducing load on the main chain—akin to adding multiple lanes to a congested highway.
Although development is labeled “parallel,” these phases are interdependent: the Beacon Chain was step one; The Merge is step two; sharding follows only after a stable PoS transition.
As of July 7, active validators on the Beacon Chain exceed 405,782, with more than 12.94 million ETH staked—representing 10.5% of total ETH supply. This growing stake reflects strong long-term confidence in Ethereum’s upgraded architecture.
Why Is Daily ETH Staking Volume Decreasing?
Despite record aggregate staking levels, daily deposits have dropped significantly since May 2025. At its peak on May 2, over 121,648 ETH were staked in a single day. Recently, daily inflows have dipped as low as 32 ETH, raising questions about shifting sentiment.
Several factors explain this trend:
📉 Bear Market Risk Aversion
Cryptocurrency markets remain in a prolonged bear phase. Investors are prioritizing capital preservation over long-term commitments. Staking requires locking up assets with no immediate liquidity until after The Merge—making it less appealing during volatile downturns.
⏳ Reward Uncertainty
Stakers won’t be able to withdraw their principal or accrued rewards until after The Merge completes and withdrawal functionality is enabled—a feature expected months post-transition. This extended lock-up period increases opportunity cost.
🔍 Caution Ahead of Major Change
Even with successful testnet rehearsals, The Merge represents uncharted territory. Some users are adopting a “wait-and-see” approach, concerned about potential bugs, security risks, or unexpected economic effects post-transition.
"Market sentiment is still the biggest variable," noted one blockchain analyst. "People believe in the vision—but they’re hesitant to commit capital until execution is proven."
Still, declining daily inflows don’t signal weakening faith. Instead, they reflect rational risk assessment amid uncertainty, not rejection of PoS itself.
How Ethereum Uses Economic Incentives to Retain Users
While competitors offer faster, cheaper blockchains—often sacrificing decentralization—Ethereum leverages value accrual mechanisms to maintain user loyalty during its gradual upgrade.
Two key innovations are transforming ETH from an inflationary asset into a potentially deflationary digital commodity:
💥 EIP-1559: Fee Burning Mechanism
Implemented in August 2021, EIP-1559 burns base fees from every transaction. As of July 5, over 2.51 million ETH have been permanently removed from circulation—exceeding new issuance under current PoW mining rewards.
📉 Reduced Issuance Post-Merge
Under PoS, annual ETH issuance will drop from ~4.3% to an estimated 0.5% or lower, depending on total staked supply. Combined with fee burning, this could make ETH net deflationary during periods of high network usage.
This shift enhances ETH’s store-of-value proposition, similar in effect to Bitcoin halvings—but driven by usage rather than fixed supply schedules.
👉 See how deflationary mechanics could reshape crypto investing strategies.
Liquidity Staking Platforms: Bridging Accessibility and Flexibility
One major barrier to staking is illiquidity: once you deposit 32 ETH into the Beacon Chain, you can't access it until withdrawals go live post-Merge. To address this, liquid staking protocols have emerged, allowing users to stake any amount of ETH while retaining tradable liquidity.
These platforms issue staked ETH derivatives (e.g., stETH, rETH), which represent both principal and accruing rewards—and can be used across DeFi for lending, trading, or yield farming.
🔹 Lido Finance – Market Leader
Lido dominates with over $4.95 billion in TVL. Users deposit any amount of ETH and receive stETH at a 1:1 ratio. stETH can be traded or used as collateral in protocols like Aave.
Lido operates via node operators approved by its DAO governance system. It charges a 10% fee on staking rewards, with insurance mechanisms to mitigate slashing risks.
However, in June 2022, stETH briefly decoupled from ETH due to redemption fears during market stress—highlighting systemic risks when derivatives dominate liquidity.
🔹 Rocket Pool – Fully Decentralized Alternative
Rocket Pool enables permissionless node creation with just 16 ETH + RPL token staking (worth 1.6 ETH). It introduces “minipools,” where small validators pool resources securely.
Unlike Lido, Rocket Pool avoids centralized control—anyone can run a node. Users receive rETH, which gradually appreciates against ETH as rewards accrue.
Its dual-stake model (ETH + RPL) adds an extra layer of security and alignment between operators and delegators.
🔹 StakeWise – Dual-Token Innovation
StakeWise separates staked principal (sETH2) from accrued rewards (rETH2), allowing users to compound rewards independently or provide liquidity for yield.
In June 2025, StakeWise launched Harbour, a B2B liquidity staking solution for institutions in partnership with Blockdaemon—expanding enterprise-grade access to PoS participation.
While convenient, liquid staking introduces counterparty and depegging risks. Users should assess platform security and diversify exposure accordingly.
Frequently Asked Questions (FAQ)
❓ When will The Merge happen?
As of mid-2025, The Merge is expected within the year following successful Goerli testnet completion. No exact date has been confirmed yet.
❓ Can I unstake ETH now?
No. Withdrawals are disabled until after The Merge and a subsequent network upgrade enabling withdrawals—likely several months later.
❓ Do I need 32 ETH to participate?
Not necessarily. Liquid staking platforms allow fractional participation with as little as 0.01 ETH.
❓ Will gas fees drop after The Merge?
Not immediately. Gas fees depend on demand and block space availability. Significant fee reductions will come later with shard chains.
❓ Is staking safe?
Running your own validator carries technical risk (slashing for downtime). Using reputable liquid staking platforms reduces complexity but adds smart contract risk.
❓ Could ETH become deflationary?
Yes—under high usage conditions where burned fees exceed new issuance post-Merge, ETH supply could contract annually.
Final Thoughts: Patience Meets Transformation
The decline in daily ETH staking doesn’t reflect fading interest—it reflects market maturity. Investors are weighing risks thoughtfully in a bear market environment while still supporting Ethereum’s long-term vision through sustained aggregate staking growth.
With robust economic design, innovative liquidity solutions, and rigorous testing underway, Ethereum remains on track to deliver a greener, faster, and more sustainable blockchain future.
👉 Stay ahead of the curve—learn how to prepare for Ethereum’s next evolutionary leap.
As we approach The Merge, one truth becomes clearer: Ethereum isn’t just upgrading its consensus mechanism—it’s redefining what a decentralized world computer can become.