Ethereum's Post-Merge Performance and the Case for Institutional Adoption

Ethereum's journey since the Merge in 2022 has been nothing short of transformative. By shifting from proof-of-work to proof-of-stake, Ethereum slashed energy consumption by 99.95%, aligning with environmental sustainability goals while fortifying network security through over 1 million active validators staking 36 million ETH—nearly a third of the total supply Three years after The Merge: Ethereum lessons from Proof-of …^[1]. But the Merge was just the beginning. Over the past three years, Ethereum has rolled out a series of technical upgrades—Shapella, Dencun, Pectra, and the upcoming Fusaka—that have redefined its scalability, usability, and institutional appeal. These upgrades are not just incremental improvements; they are foundational shifts that position Ethereum as a robust, enterprise-grade blockchain.

The Pectra Upgrade: A Catalyst for Institutional Staking

The Pectra upgrade in May 2025 marked a pivotal milestone. By increasing the validator staking limit from 32 ETH to 2,048 ETH, it streamlined operations for large stakers, reducing the overhead of managing multiple validators and lowering costs for institutions Ethereum in 2025: NFTs, ETFs, and Institutional Adoption^[3]. This change, encapsulated in EIP-7251, directly addresses the operational complexity that had previously deterred institutional participation. For example, BlackRock and UBS have already deployed on-chain strategies leveraging this flexibility, enabling them to allocate capital more efficiently while maintaining decentralization Three years after The Merge: Ethereum lessons from Proof-of …^[1].

Additionally, Pectra introduced account abstraction via EIP-7702, allowing smart contract wallets with features like multisig and social recovery. This innovation is critical for institutional-grade security and compliance, enabling custodians to manage assets with granular control and auditability Ethereum in 2025: NFTs, ETFs, and Institutional Adoption^[3]. The upgrade also expanded data blob capacity per block from 3 to 6, enhancing Layer 2 (L2) scalability and reducing transaction costs by 90%—a boon for DeFi and NFT platforms Three years after The Merge: Ethereum lessons from Proof-of …^[1].

Fusaka: Scaling for the Future

Scheduled for November 2025, the Fusaka upgrade will further cement Ethereum's scalability. PeerDAS (EIP-7594) will allow validators to sample data availability without downloading entire datasets, slashing bandwidth requirements and improving L2 performance Ethereum Fusaka Upgrade: What the November 2025 Hard Fork Means^[4]. This is particularly significant for rollups like Arbitrum and Optimism, which rely on efficient data availability to maintain throughput. Fusaka also includes EIP-7935, which increases the gas limit from 30 million to 150 million, enabling more transactions per block and reducing congestion Ethereum Fusaka Upgrade: What the November 2025 Hard Fork Means^[4].

For institutions, these upgrades mean Ethereum can now rival traditional financial infrastructure in terms of speed and cost. As one industry analyst notes, “Fusaka's optimizations will make Ethereum the go-to base layer for enterprises seeking blockchain solutions without compromising on decentralization” The Battle of Metrics: TVL vs. Institutional Inflows^[5].

Institutional Adoption: Metrics and Momentum

The technical upgrades have directly fueled institutional adoption. Ethereum's Total Value Locked (TVL) surged to $90 billion by July 2025, representing 60% of the DeFi ecosystem's total TVL The Battle of Metrics: TVL vs. Institutional Inflows^[5]. This growth is driven by reduced L2 fees (down 90% post-Dencun) and the introduction of staked Ethereum ETFs, which saw $907.99 million in weekly inflows in July 2025 Ethereum Surges Past $3,000: Strong Institutional Inflows and …^[2].

Regulatory tailwinds have further accelerated adoption. The U.S. SEC's approval of in-kind creation/redemption for Ethereum ETFs and the exemption of stETH from securities rules have made Ethereum a more accessible asset class The Battle of Metrics: TVL vs. Institutional Inflows^[5]. As a result, spot Ethereum ETFs now hold $20.11 billion in net assets, with $5.43 billion in net inflows recorded in July 2025 alone Ethereum in 2025: NFTs, ETFs, and Institutional Adoption^[3].

Challenges and the Road Ahead

Despite these gains, challenges persist. The increased validator staking limit in Pectra raises centralization risks, as larger entities may dominate staking pools Three years after The Merge: Ethereum lessons from Proof-of …^[1]. Additionally, Ethereum faces competition from Solana and BNB Chain, which offer faster transaction speeds. However, Ethereum's focus on L2 interoperability and post-quantum cryptography (via Fusaka) positions it to address these threats Ethereum Fusaka Upgrade: What the November 2025 Hard Fork Means^[4].

Conclusion

Ethereum's post-Merge technical upgrades have created a flywheel effect: improved scalability attracts developers and users, which in turn drives institutional adoption. With Pectra and Fusaka addressing both operational efficiency and long-term security, Ethereum is no longer just a speculative asset—it's a foundational infrastructure for the next era of finance. For institutions, the case is clear: Ethereum's technical roadmap aligns with the demands of modern capital markets, making it a compelling long-term investment.