Since the landmark Merge event in 2022, the issuance of new Ether has entered its longest period of inflation, with the Dencun update in March being the apparent catalyst.
The quantity of Ether (ETH) has been on a steady rise, with the total supply expanding by over 112,000 ETH since April 14, as reported by the Ethereum data platform ultrasound.money.
The inflationary trend can largely be traced back to the Dencun update that took effect on March 13. The update rolled out nine Ethereum Improvement Proposals (EIPs), among which EIP-4844 has been identified as the main contributor to the surge in supply.
Graph showing the rise in ETH supply post-April 14. Courtesy of ultrasound.money
EIP-4844 introduced “blobs,” a feature designed to store transaction data separately and temporarily, thereby lowering the cost of block data storage on Ethereum’s layer-2 networks.
Furthermore, the Dencun update brought in proto-danksharding, enhancing the efficiency of data availability for Ethereum’s mainnet block space.
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This development has led to a significant drop in transaction costs on Ethereum’s layer-2 networks, including Arbitrum and Optimism. However, it has also resulted in a noticeable decrease in the amount of ETH being burned on the mainnet.
Despite the recent inflationary trend, the overall supply of ETH has seen a considerable decline since the Merge. A total of over 1.5 billion ETH has been burned since September 2022, while 1.36 billion ETH has been minted, culminating in a net reduction of 345,000 ETH in the supply, which is equivalent to just over $1.1 billion at the current market value, marking the transition of Ethereum to a proof-of-stake consensus model.
Illustration of over $1.1 billion in ETH burned post-Merge. Source: ultrasound.money
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