Dencun Upgrade Spurs Prolonged Ether Inflation Despite Significant Burn Since The Merge
Summary:
Since the Merge in 2022, Ether's (ETH) supply has experienced a prolonged inflation, attributed to the Dencun upgrade in March. While more than 1.5 billion ETH has been burned since September 2022, a further 1.36 billion ETH has been added, resulting in a net supply reduction of about 345,000 ETH. Despite recent inflation, this indicates a significant decrease in the overall supply since the switch to a proof of stake consensus mechanism.
Since the Merge in 2022, the issuance of fresh Ether (ETH) has been going through one of its most prolonged inflationary periods. The cause of this seems to be tied to the Dencun upgrade executed in March. The amount of available ethereal has been consistently swelling, with ultrasound.money's Ethereum data tracker indicating a growth of over 112,000 ETH in the total supply since April 14.
The root of much of this inflationary shift can be traced to the implementation of the Dencun upgrade, which took place on March 13 and introduced nine new Ethereum Improvement Proposals (EIPs), EIP-4844 being notably responsible for this inflation.
EIP-4844 paved the way for "blobs", an innovation that enables transaction data to be stored separately and temporarily, therefore reducing the costs associated with block data on Ethereum's layer 2 networks. Furthermore, the Dencun upgrade brought forth proto-danksharding, leading to more efficient availability of block space data on the Ethereum mainnet.
This development significantly cut down the cost of conducting transactions on second-layer Ethereum networks such as Abritrum and Optimism. However, it also led to a noteworthy downturn in the number of ETH being burned on the mainnet. Despite the recent inflationary trend of ETH, the total supply has substantially diminished since The Merge.
To put it into perspective, over 1.5 billion ETH has been burned since September 2022, while 1.36 billion ETH has been added to the total supply. The result is a net reduction in the supply of around 345,000 ETH, corresponding to an approximate $1.1 billion at the current market rate since the shift to a proof of stake consensus algorithm.
Polygon's Anurag Arjun never intended to outdo Ethereum, as evidenced by the X Hall of Flame.
Published At
6/26/2024 6:31:48 AM
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