The circulating supply of Ethereum (ETH) has increased by over 37,000 ETH in the past 30 days following the Dencun upgrade. As a result, the monthly inflation rate for the leading Web3 network was 0.38%, which has been deflationary since January 2023.
The Ethereum network activated the Dencun upgrade with EIP-4844 on March 13, 2024. Dencun significantly reduces transaction costs at layer 2 of Ethereum through “proto-dunksharding.”
In particular, this enhancement makes Ethereum more efficient and cost-effective for users, and represents a significant step forward in ETH adoption. Conversely, the amount of supply burnt due to gas fees that deflated Ethereum will also decrease.
especially, ultra sound money The platform shows that 37,789.04 ETH was added to the circulating supply in the past 30 days. This is the result of 75,013.39 ETH issued as staking rewards and 37,224.25 ETH spent.
Ethereum: super healthy money
“Ultra Sound Money” memes proliferated after “The Merge” upgrade, along with EIP-1559’s fee burn mechanism implemented in 2021.
Essentially, investors expected that if the amount burned in fees exceeded the amount issued, the circulating supply of ETH would become deflationary. This mechanism has removed more than 417,000 ETH from circulation since the merger, resulting in 0.21% annual supply deflation, meeting expectations over the past two years.
Dencun upgrade: Is this the end of “Ultra Sound Money”?
Regarding that point, cryptoquant analyzed The impact of the Dencun upgrade on Ethereum’s “ultra-sound money” attribute. According to analysts, the median trading fee before the Dencun upgrade was positively correlated with network activity.
However, since the implementation of EIP-4844, median transaction fees have gradually declined.
“The Dencun upgrade decouples #Ethereum transaction fees from network activity, reducing burn rates even when activity is high. This leads to lower user fees, but challenges the deflationary mechanism set up by Merge. , a significant increase in network activity will be required to maintain deflation.”
– cryptoquant
Nevertheless, it is still too early for the market to judge whether Ethereum will become an inflationary cryptocurrency again. Investors are closely monitoring future developments and ETH economic data. On the other hand, lower fees per transaction can increase demand on the network and increase the overall value of the network.
