Ethereum experiences longest inflation since Merge

New etherInflation of (ETH) supply, EthereumIt has been at record levels since Merge, largely due to the Dencun update that went into effect in the third month of the year.

Impact of Dencun update

As of April 14, more than 112 thousand ETH has been added to the total supply, according to Ethereum data dashboard ultrasound.money. Inflationary activities began quickly after the Dencun update on March 13, which introduced nine Ethereum Improvement Proposals (EIPs). Among these EIPs, EIP-4844 was cited as one of the sources of inflation.

With EIP-4844, transactional information was stored in a different and discontinuous format in order to ease the processes on layer 2 networks in Ethereum. This update also included proto-danksharding, which increases the availability of information on block space on the Ethereum mainnet. Although these changes significantly reduced the costs of processes in layer 2 solutions such as Arbitrum and Optimism, burning processes at the mainnet level decreased quickly after these changes.

ETH supply dynamics

However, it should be noted that the inflation rate has increased in recent years, but the total ETH size has decreased significantly after the Merge. According to September 2022 data, 1.5 billion ETH was burned and 1.36 billion ETH was supplied; Therefore, there was a net decrease of 345,000 ETH. This reduction has occurred since the transition to proof-of-stake consensus, at $1.1 billion, which is slightly more at current prices.

The effects of the Dencun update on prices and information storage capacity for processes show the increasing complexity of the Ethereum space. With the growth of the platform, the effort amid inflation and deflation will play a valuable role in determining the future economic environment.

This news was first published on the Coin Mühendisi website.