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30601
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Fear & Greed:
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Bitcoin:
$ 58.614
BTC Dominance:
% 53.3
Market Cap:
$2.13 T

Ethereum Faces Longest Inflationary Spell Since Merge Due to Dencun Upgrade

Ethereum, Dencun Upgrade

It has been one month since the inflation of the new Ether (ETH) has been listed at a record high since the Ethereum Merge in 2022, largely as a result of the Dencun upgrade enacted in the third month of the year.

Impact of Dencun Upgrade

Thus, starting from April 14, more than 112 thousand ETH have been added to the total supply, as reported by the Ethereum data dashboard ultrasound.money. The inflationary activity started soon after the Dencun upgrade on March 13, which brought nine Ethereum Improvement Proposals (EIPs), among which EIP-4844 was cited as one of the sources of the inflation.

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Blobs was incorporated through EIP-4844 whereby the transactional information is stored in a separate and temporary format in order to relieve the layer 2 networks for block data fees in Ethereum. This upgrade also entailed proto-danksharding which improved the availability of data on block space on the Ethereum mainnet. Although these changes drastically lowered the costs of the transactions on layer 2 solutions such as Arbitrum and Optimism, the burning at the mainnet level had reduced right after these changes took place.

ETH Supply Dynamics

However, it is necessary to note that the rate of inflation has increased in recent years, but the total amount of ETH in circulation has reduced immensely after The Merge. According to data from September 2022,  1.5 billion ETH has been burned while 1,36 billion ETH is minted to supply; thus, there is a net shrinkage of 345,000 ETH. This decrease stand at a little over $1,1 billion current prices fait since the shift to a proof-of-stake consensus mechanism.

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The effects of the change on the fee for transactions and storage capacity of the data for every Dencun upgrade demonstrates the growing complexity of the Ethereum space. Thus, reviewing the role and significance of the platform as it grows further, the struggle between inflation and deflation will play a major role in determining the future economic environment.

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