Ether turns inflationary for the first time since Merge

As an experienced analyst, I believe the recent development in Ethereum’s (ETH) supply dynamics following the Dencun upgrade is a significant shift for the network. The transition from deflationary to inflationary status may not be critical for Ethereum given its primary focus on decentralized applications (DApps), but it could have implications for Ether’s narrative as “ultra sound money.”

As an analyst, I’ve observed a significant shift in the monetary policy of Ethereum (ETH) following the successful implementation of the London upgraded, referred to as EIP-1559, approximately two months ago. This transition has led to Ethereum’s supply no longer being deflationary.

On May 7, the total amount of Ether in circulation grew to 120.1 million from its previous count of 120 million on March 12. This expansion took place prior to the deployment of the Dencun upgrade on the Ethereum mainnet, as indicated by CryptoQuant’s data.

During this time frame, there was a slight rise in the Ether supply, signifying the first instance of inflation since Ethereum underwent the anticipated Merge upgrade in September 2022, switching its consensus mechanism from proof-of-work to proof-of-stake.

Ether turns inflationary for the first time since Merge

According to the founder and CEO of Cryptoquant, it’s not overly concerning if Ether momentarily relinquishes its deflationary nature for the Ethereum network. The primary advantages of Ethereum lie in its support for decentralized applications (DApps). In a May 9 blog post, Ki Young Ju expressed this perspective.

“Post-Dencun upgrade, $ETH lost deflationary status with reduced fees, departing from “ultrasound money.” Ethereum’s strength lies in DApps; it’s wiser not to compare it to Bitcoin’s sound money narrative.”

Ether turns inflationary for the first time since Merge

As a crypto investor, I’ve noticed an intriguing development in the Ethereum ecosystem post-Merge on September 15, 2022. The deflationary nature of Ether supply became apparent with the introduction of a mechanism that permanently burns transaction fees. Consequently, this results in a continuously shrinking Ether supply.

As a researcher, I’ve discovered that approximately 419,713 units of Ethereum tokens have been eradicated from circulation since the Merge event, based on data from

Ether turns inflationary for the first time since Merge

The death of “ultra sound” money?

The Dencun upgrade has put a halt to Ether’s inflationary trend, resulting in median transaction fees that are approximately four times less expensive than previously, despite equal network activity levels.

According to a May 8 analysis by CryptoQuant, this development represents a notable advancement for the Ethereum network and its community members. However, it may signal the demise of Ether’s standing as a digital equivalent of gold or other ultra-sound currencies.

“The Dencun upgrade has made ETH inflationary again, potentially killing the narrative of “Ultra sound” money as a structurally lower amount of transaction fees burned on Ethereum have had the corresponding effect of not decreasing the total supply of ETH to keep it deflationary.”

As an analyst, I’ve observed a significant decrease in the amount of Ether being burned due to reduced transaction fees following the Merge. Simultaneously, Ether’s supply growth has reached its peak post-upgrade level.

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2024-05-09 17:08