The Ethereum network underwent a significant change with the implementation of the Dencun upgrade, leading to a shift in the supply dynamics of Ether (ETH). Following this upgrade, which went live two months ago, the total supply of Ether increased from 120 million on March 12 to 120.1 million on May 7, marking the first instance of an inflationary trend since September 2022.
Although the increase in supply is relatively minor, it represents a departure from Ether’s previous deflationary trajectory, which was initiated by the Merge transition to a proof-of-stake consensus model. This transition had led to a decrease in Ether supply through the burning of transaction fees.
Despite Ether’s temporary loss of deflationary status, it is noted that Ethereum’s primary strengths lie in its decentralized applications (DApps), rather than its narrative as “ultrasound money.” The reduced transaction fees introduced by the Dencun upgrade have made Ether transactions more affordable, but they have also impacted the narrative surrounding Ether’s monetary properties.
The decrease in transaction fees has resulted in a decline in the amount of Ether being burned, leading to the end of its status as ultra-sound money. This shift in narrative is highlighted by the decrease in total supply and the increase in supply growth following the upgrade.
May 2024, Cryptoniteuae
