It has been 217 days since Ethereum (ETH) transitioned from an energy-intensive Proof-of-Work (PoW) consensus mechanism to a green Proof-of-Stake (PoS) consensus mechanism.

Since then, the cryptocurrency’s native token has dropped significantly, losing 104,939.20 ETH, more than $200 million at its current market value.

This decrease corresponds to a 0.146% decrease in the annual supply of ETH, according to statistical data from the Ethereum monitoring site.

Decrease in ether supply:

If Ethereum hadn’t gone through a merger, stuck, and continued to rely on miners to protect the network, the supply of Ether would have increased by over 2.5 million coins, equivalent to a staggering $4.9 billion in today’s market value. amount. Additionally, Ethereum’s native coin supply would have surged by 3.53% each year.

London Upgrade Caused Ethereum Shift To Deflation

The Merge caused a significant reduction in ETH supply, but was not directly responsible for burning ETH. Through Ethereum Improvement Proposal 1559 (EIP-1559), which was rolled out with the August 2021 London Upgrade, the tokennomics aspect of ETH burning was implemented.

With the London upgrade, transaction fees were split into two: base and priority fees. The base fee is burned and can no longer be used on the network, while the priority fee acts as a payment to the miners. However, with the move to PoS, miners no longer exist in the network.

Implemented in the London upgrade, EIP-1559 was designed to curb inflation on the Ethereum network and put deflationary pressure on the ETH supply. Nevertheless, the total ETH supply has increased by 3.21 million coins since the upgrade was implemented.

Given the increased burning of ETH since the Shapella upgrade and the ability to withdraw staked ETH, we expect the downward trend in supply to continue in the coming months.

Post-Merge Ethereum: $4.9B in Potential Supply Increase Avoided by Proof-of-Stake Migration First Appears on CryptoSlate.

By Jules

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