Home » Ether (ETH) becomes deflationary again for the first time in 2023

Ether (ETH) becomes deflationary again for the first time in 2023

by Thomas

As we enter 2023, the Ether (ETH) has become deflationary again. Since The Merge, the total amount in circulation has decreased by 3,269 ETH, compared to an increase of more than 1.5 million ETH if we had remained in Proof Of Work. How can this be explained

Ether (ETH) deflationary again

For the first time in 2023, the Ether (ETH) has become deflationary again. In other words, this means that the current use of the Ethereum blockchain is resulting in a greater burn of coins than is being created to run it.

As Ultrasound.money reports, the current amount of Ether in circulation is 120.5 million coins. This is exactly 3,269 ETH less than when The Merge was implemented last September. Worse, the Proof Of Work consensus would have resulted in the creation of over 1.5 million new ETH, or $2 billion at the current price.

ETH supply reduction since The Merge

ETH supply reduction since The Merge


In the current configuration, the Ethereum network operation results in the creation of about 674,000 ETH per year for validator fees while usage burns about 850,000 ETH per year. This would correspond to a 0.17% reduction in the amount in circulation each year.

Note however that these figures are based on current blockchain usage and can vary widely.

How to explain the deflationary aspect of ETH

There are several factors that can explain Ether’s transition to a deflationary pattern. The first one is obviously the implementation of The Merge update, signalling a transition from a Proof Of Work consensus to Proof Of Stake. This has drastically reduced the rewards for validators by removing those for miners in favour of stakers.

In addition, it should be noted that transaction volumes on Ethereum have been on the rise since the beginning of 2023. Leading the way are non-fungible tokens (NFTs), which have seen an increase in activity in recent days. The result is an increase in gas fees, part of which is burned in every transaction on the Ethereum network.

For information, the Shanghai update will be implemented on the Ethereum testnet next month and on the main network during March 2023. This is highly anticipated as it means that users will be able to remove locked Ethers in Ethereum 2.0 smart contracts.

Related Posts

Leave a Comment