The deflationary nature of Ethereum’s Ether (ETH) supply has come to an end following the implementation of the highly anticipated Dencun upgrade. Data from CryptoQuant shows that the total Ether supply increased from 120 million on March 12 to 120.1 million on May 7 after the Dencun upgrade was launched on the mainnet. Although this increase is relatively small, it signifies the first period of inflation for Ether since September 2022, when the Merge transitioned Ethereum to its proof-of-stake consensus model.
The temporary loss of Ether’s deflationary status is not of great concern for the Ethereum network, as its primary advantages are more closely tied to decentralized applications (DApps), according to Ki Young Ju, founder and CEO of CryptoQuant. In a post on May 9, he stated that Ether’s deflationary status is not as crucial as its functionality for DApps.
Ether first became deflationary after the Merge on September 15, 2022, when a mechanism was introduced to permanently burn transaction fees, resulting in a decrease in Ether supply. Since the Merge, over 419,713 Ether tokens have been permanently removed from circulation, as reported by ultrasound.money.
The Dencun upgrade has put an end to Ether’s inflationary trend by significantly reducing median transaction fees while maintaining the same level of network activity. However, this could also mean the end of Ether’s status as “ultra-sound money,” as stated in a report by CryptoQuant on May 8. With lower transaction fees, the amount of Ether being burned has decreased to its lowest levels since the Merge, while supply growth has reached its highest level since the upgrade.
In related news, a subsidiary of VanEck reported a 137% year-to-date increase in its memecoin index.