The supply of Ethereum's native asset ether (ETH) appears on trend to deflate to pre-Merge levels as a result of more coins being burned than created for the last few weeks, on-chain data shows.
At the time of The Merge on Sept. 15, Ethereum's upgrade from proof-of-work to proof-of-stake consensus, the ETH supply was 120,520,000 coins. After The Merge, the supply rose to 120,534,000 on Oct. 8, but has since fallen back to 120,522,000, now sitting just a couple of thousand coins more than the supply recorded at The Merge. This deflationary trend has occurred as more coins have been burned for transaction fees than were created as rewards for validators in recent weeks.
“Since issuance is significantly reduced now compared to pre-Merge, even a slight increase in burned ETH from recent levels would make daily net emission go negative,” said Kevin Peng, research analyst at The Block.
The deflationary supply after The Merge
One of the many changes from The Merge is a 90% reduction in new token supply issuance amid the elimination of miner subsidies in the former proof-of-work blockchain. Combined with the EIP-1559 feature on Ethereum, where a portion of transaction, or gas, fees are "burned," it's estimated that more ether is destroyed than added to supply whenever the transaction fees go above 16 gwei, the very trend being observed now. In fact, the supply is merely 1,700 ETH away from getting to pre-Merge level and continuously going down, according to data from ultrasound.money.
If this trend continues, and fee burns remain greater than new issuance, we may see supply growth drop below the level prior to The Merge in the next few days, noted DeFi researcher Mika Honkasalo. "Post-merge total supply change is about to turn negative in the next 5-7 days," Honkasalo tweeted.
Source : www.theblock.co/post/179144/ethereum-token-supply-on-trend-to-drop-below-pre-merge-levels?utm_source=feedly&utm_medium=rss by Vishal Chawla - October 22, 2022