Ethereum has been deflationary in the past five days, and the total supply declined by about 5,500 ETH Since October 8th.
The Merge marked Ethereum’s transition to a Proof-of-Stake consensus algorithm, and one of the most drastic changes this introduced was related to ETH’s supply dynamics.
Since ETH is no longer being mined, the amount of it hitting the market on a daily basis is reduced considerably by a margin upwards of 90%. Data from ultrasound money helps us track the changes.
At the time of this writing, a total of 7,525 ETH has hit the market since the Merge in the shape of fresh supply.
Simulating a PoW environment shows us that this number would have been around 340,000 ETH if the network was still running on its old consensus algorithm.
Source: ultrasound.money
That said, in the past few days, the supply has been shrinking rather than expanding, turning ETH into a deflationary cryptocurrency, albeit temporary.
Since October 8th, the supply has declined by about 5,500 ETH. This is because of the way EIP-1559 and the burning mechanism that it introduced.
Because of it, a portion of the fees paid (in ETH) is burned with every transaction.
According to calculations made by the Ethereum Foundation, it would take a gas price of about 15 gwei for ETH to be deflationary.
This has been the case for a few days, and one of the primary reasons seems to have been the new project called XEN Crypto.
As CryptoPotato reported earlier in the week, it caused the Ethereum network issuance to fall and the gas prices to rise as over $1.8 million was paid in gas fees to interact with the token’s contract.
Georgi Georgiev is CryptoPotato's editor-in-chief and seasoned writer with over four years of experience writing about blockchain and cryptocurrencies. Georgi's passion for Bitcoin and cryptocurrencies bloomed in late 2016 and he hasn't looked back since. Crypto’s technological and economic implications are what interest him most, and he has one eye turned to the market whenever he’s not sleeping. Contact George: LinkedIn
