The deflationary nature of Ether (ETH) has come to an end after the implementation of Ethereum’s highly anticipated Dencun upgrade. According to data from CryptoQuant, the total supply of Ether increased from 120 million to 120.1 million between March 12 and May 7, following the rollout of the Dencun upgrade on the mainnet.
Although this increase is relatively small, it signifies the first instance of Ether’s supply turning inflationary since September 2022, when the Merge transitioned Ethereum to its current proof-of-stake consensus model.
The temporary loss of Ether’s deflationary status is not a cause for concern for the Ethereum network, as its primary advantages are more closely related to decentralized applications (DApps), according to Ki Young Ju, the founder and CEO of CryptoQuant. In a post on May 9, he stated that Ether’s supply became deflationary after the Merge on September 15, 2022, when a mechanism was introduced to permanently burn transaction fees on the network, resulting in a reduction in Ether supply. Since the Merge, over 419,713 ETH has been burned or removed from circulation, as reported by ultrasound.money.
The Dencun upgrade has brought an end to Ether’s inflationary trend by significantly reducing median transaction fees while maintaining the same level of network activity. This is a significant milestone for the Ethereum network and its users. However, it could also mean the end of Ether’s status as “ultra sound money,” as highlighted in a report by CryptoQuant on May 8. The decrease in transaction fees has led to a decline in the amount of Ether being burned, reaching its lowest levels since the Merge, while supply growth has reached its highest level since the upgrade.
In related news, a memecoin index managed by a subsidiary of VanEck has seen a 137% year-to-date increase, demonstrating the continued growth and adoption of cryptocurrencies.