Today marks 240 days since the Ethereum network transitioned from a Proof of Work (PoW) consensus mechanism to one based on Proof of Stake (PoS). The shift has resulted in a decrease in the total ETH supply by way of burning nearly 650,000 ETH and minting just under 424,000 new ETH, ultimately producing a net supply change of around -226,000 ETH. Evenly spaced out, this results in a 0.213% or 0.285% annualized decrease, thus signaling a deflationary trajectory for the cryptocurrency.

This decrease in ETH supply is largely attributed to a technical change that saw Ethereum switch from miners to validators and their associated rewards, which are significantly lower than the former. Miners were receiving around 13,000 ETH a day, while since the merge, the only fresh Ether being issued is the roughly 1,700 ETH a day that goes to stakers. Furthermore, higher burn rates are also driving ETH deflation.

Long-term Ether holders are likely to be rewarded by the deflationary trajectory, as it could push the price of ETH up. Mathematically, the total circulating supply will go down until it reaches an equilibrium where issuance equals burn rate, estimated to lie between 27.3 million and 49.5 million ETH. However, the exact speed of this deflationary trajectory is dependent on a number of factors and its impact over the coming years is yet to be seen.



Other News from Today