The supply of Ether (ETH) has stopped being deflationary after the implementation of Ethereum’s highly anticipated Dencun upgrade, which was activated on the mainnet two months ago. According to data from CryptoQuant, the total supply of Ether increased from 120 million on March 12 to 120.1 million on May 7, right before the Dencun upgrade was rolled out. Although this increase is small, it is the first time that the supply of Ether has turned inflationary since September 2022, when the Merge transitioned Ethereum to its current proof-of-stake consensus model.
According to the founder and CEO of CryptoQuant, Ether temporarily losing its deflationary status is not a critical issue for the Ethereum network, as its main advantages are more related to decentralized applications (DApps). In a post on May 9, Ki Young Ju stated that Ether’s supply first became deflationary after the Merge on September 15, 2022, when a mechanism was introduced to permanently burn transaction fees on the network, resulting in a decrease in Ether’s supply. Since the Merge, over 419,713 ETH has been burned or 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, making them up to four times cheaper than before, while maintaining the same level of network activity. Although this is a significant milestone for the Ethereum network and its users, it may also signify the end of Ether’s status as ultra sound money, as noted in a report by CryptoQuant on May 8. The decrease in transaction fees has led to a decline in the amount of Ether being burned, reaching the lowest levels since the Merge, while the supply growth has increased to its highest level since the upgrade.
In related news, a memecoin index managed by a subsidiary of VanEck has experienced a 137% increase year-to-date.