Ether Supply Shifts: Dencun Upgrade Marks First Inflation Since Merge

Recently, a released data indicating that the total supply of Ether has increased from 120 million on March 12 to 120.1 million on May 7.

This small but noteworthy increase marks the first time since September 2022 that Ether supply has turned inflationary, following the highly anticipated Merge transition that moved Ethereum to a proof-of-stake consensus model. This shift in trend is attributed to the Dencun upgrade, which went live on Ethereum’s mainnet two months ago. 

The Dencun upgrade is designed to improve the security and efficiency of the Ethereum network. It introduced a new transaction format, which reduced the cost of transactions and increased their speed. 

It also implemented a new fee structure, which ensures that miners receive a fair share of transaction fees and that the network remains secure and decentralized. 

The increase in Ether supply is a result of the upgrade’s impact on the network’s economics. Prior to the Dencun upgrade, the supply of Ether was deflationary, meaning that the number of Ethers in circulation decreased over time, which could lead to scarcity. However, the upgrade has changed the supply dynamics, leading to an inflationary trend. 

While the increase in supply is currently small, it is significant because it represents a shift away from the previous deflationary trend that could have had long-term implications for Ethereum’s economic model.

Following the implementation of the Merge on September 15, 2022, a new mechanism was introduced on the Ether network that resulted in a deflationary supply of Ether. This mechanism involved the permanent burning of transaction fees on the network, which led to a decrease in the total amount of Ether in circulation. 

As a result of this change, the supply of Ether became increasingly scarce, with over 419,713 Ether tokens being permanently removed from circulation since the implementation of the Merge. This move towards a deflationary supply of Ether has significant implications for the future of the cryptocurrency market, and it will be interesting to see how it impacts the value of Ether over time.

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