On-chain data reveal that the quantity of Ethereum released every day has been dramatically reduced since the Merge, indicating that the asset is on its road to becoming deflationary.
Update 29 September 19:30: The current supply growth rate is 0.09%, with 14,042,583 ETH now in the Ethereum staking contract, totaling $18.7 billion.
Since the Merge, Ethereum’s issuance rate has dropped by 98%.
Since the switch, the network’s supply has increased by 7,385.47 ETH, but if it had remained on the Proof-of-Work (PoW) consensus model, it would have increased by 128,422.13 ETH.
ETH supply has increased by 0.34% in the previous 24 hours. It would have been 3.86% under PoW during the same time period.
Some claim that the drop in token supply is not only due to the switch to PoS. They also relate this development to less traffic on the Ethereum network, which equals cheaper gas prices.
In addition, part of the mining community abandoning the blockchain can also be a factor that contributes to this drop.
However, the network’s activity decreased prior to the Merge, and more ETH tokens were still produced by PoW.
Still Not Deflationary
Prior to the Merge, the issue of ether incentives for proof-of-work mining amounted to around 13,000 ether (ETH) each day. Consider this to be Ethereum’s security budget.
Unlike PoW, PoS issues a lot less ETH per day through its validators. On the other hand, may run on considerably smaller and more energy-efficient hardware.
Staking payouts are presently at 1,600 ETH each day, serving the same function in preserving consensus and security as before, but at a nearly 90% decrease in issuance.
For Ethereum to become deflationary, the blockchain will have to burn a lot of Ether beforehand.
Today, Ethereum is not yet deflationary because the total number of tokens issued exceeds the total number of tokens consumed. Supply is still increasing but at a slow pace.
Approximately 519 ETH were burned on the last day. However, the network generates around 772 ETH tokens every day.
Despite a significant drop in its issuance pace, Ethereum’s price continues to underperform. It is currently trading just above $1,300 after falling 9.6% in the previous seven days.
Several experts projected that the asset’s price performance would improve when the Merge was completed. However, Ethereum’s price has been primarily negative since the transfer, falling by about 20% since the merger.
Much of that is due to external forces like foreign governments’ central banks adopting a high-interest rate policy, which causes cryptocurrencies to devalue.
As governments start to decrease their interest rates in the future, cryptocurrencies like Ethereum will likely see a valorization in the future.