The merge was without a doubt one of the biggest events to happen in the cryptocurrency sector of the last decade.
On September 15th of 2022, the world’s second-largest cryptocurrency by market capitalization completely changed its consensus mechanism to “proof-of-stake”. That change marked the end of Ethereum cryptocurrency mining and also the transition to a “greener” blockchain, due to PoW only needing 0.01% of the energy use of Proof-of-Work.
The much-awaited update set the first milestone for Ethereum under PoS. Following the adoption of the staking mechanism, Ethereum is expected to go through several major updates that will severely increase the blockchain’s speed and capacity in the following months.
One of the most anticipated moments post-merge is the day that Ethereum finally becomes deflationary.
“Deflationary” is the term to describe when a currency generates a depreciating supply, ie. producing fewer new coins than before.
Path to Deflationary
In order to become deflationary, Ethereum needs to produce coins at a slower pace than previously.
Given that Ethereum produces 98% fewer new tokens under the staking mechanism, a deflationary Ether was bound to happen.
And that’s exactly what’s been happening. ETH supply has decreased by almost 4,000 tokens since Saturday and by nearly 10,000 Eth since the transition to PoS.
So far there has been no commensurate price increase. ETH’s price has declined 3.6% in the same timeframe, to $1,307 despite the smaller supply.
The validators who process all ETH transactions keep the gas costs. However, since the release of EP-1559, a part of every gas tax has been destroyed in order to automate transaction pricing and restrict the supply of ETH.
Beginning on Saturday, the cost and volume of gas costs began to consume more ETH than was being created simultaneously via staking – the post-merge procedure by which ETH is now generated.
Since then, the total number of ETH in circulation has decreased by 4,001 ETH, with the rate of burning still outpacing the rate of ETH creation.
XEN Crypto Influence On Deflationary ETH
Recently, Ethereum’s average gas costs on the network have risen 218% since Friday, to 35 gwei.
The source of the abnormal increase in Ethereum traffic – and consequently the jump in gas fees that caused ETH to become deflationary appears to be a new token initiative named “XEN Crypto”.
Today, XEN Crypto transactions account for 40% of all gas spent network-wide in the previous 24 hours – according to etherscan.io.
“When XEN launched — Ethereum supply shows a reduction from Oct 8th onward.” Jack Levin, founder of XEN Crypto wrote in a Tweet.
What Is XEN Crypto?
The Fair Crypto Foundation, which is funded by former Google employee Jack Levin, established the XEN ERC-20 coin. The token’s objective, according to its website, is to enable people to mint their way to freedom.
With no pre-stipulated set quantity, the token takes a new approach. Holders can continue to mint the token indefinitely; however, the difficulty of minting is projected to increase as more individuals join the network. There are no immutable contracts or admin keys in XEN.