Tech
Ether returns to an inflationary asset after Dencun’s upgrade reduces fees
Ethereum’s recent Dencun update, designed to reduce fees and help expand the network, has caused (ETH) return to an inflationary asset, potentially reversing one of the key benefits of the 2022 merger.
A report from CryptoQuant reveals that Dencun has made transaction fees on Ethereum four times lower on average than before, but that also means that the amount of ETH burned has fallen to one of the lowest levels since the merger and offering they are growing at the lowest level. fastest rate since 2022.
The merger in 2022 saw Ethereum move from a proof-of-work to a proof-of-stake blockchain. This worked in tandem with a previous London update that implemented a mechanism that burned a portion of transaction fees (the base fee), effectively removing ETH from circulation and causing deflationary pressures.
Dencun, the most recent update, implemented “danksharding,” which improved block storage and made layer-2 networks cheaper.
Ether has been a deflationary asset following the merger, with the token’s total supply dropping from 120.491 million to 120.097 million as of September 2022. However, the total amount of fees burned has been decoupled from network activity post-Dencun , meaning that the natural increase in the bid is exceeding the amount burned in commissions. Since April, the supply of Ether has therefore increased by 400,000 tokens.
FIX (18:43 UTC): Corrects spelling of “danksharding”.