Ethereum – Will ETH Go Deflationary After The Merge?

The question was legitimate and openly asked before the initiation of the merger – The Merge – from the network Ethereum. Was this historic change going to have an effective impact on the still very hypothetical deflationary character of the cryptocurrency ETH ? A question to put in the same file as its transaction costs, obviously not revised downwards following this digital paradigm shift. And even if some figures allow to think that the dynamic engages in a rather positive direction, everything remains to be demonstrated in the field. Explanations…

The mutation – The Merge – of ethereum network has now been in effect for more than 10 days. A historic step announced and especially awaited for years. With, upstream of this operation, the establishment more than a year ago of the principle EIP-1559. That is to say the burn ETH during each transaction on its network. And as an expected consequence, the possibility of seeing its cryptocurrency ETH to become deflationary. That on the model, all things considered, of Bitcoin (BTC).

A reality that is currently coming back to the fore. This following the transition initiated to a Blockchain Proof of Stake (PoS). Because it could well be the accelerator that this dynamic lacked to register it as an established fact. To the point of making ETH cryptocurrency this supposed “ultrasound” currency become stronger than BTC. But again opinions are divided. Even if the numbers tip the balance in the direction ofa scheduled decrease in the available amount of ETH.

Ethereum – Deflationary after The Merge?

Indeed, the data are unanimous on this point. The quantity of ETH cryptocurrencies issued since the initiation of its merger to PoS has recorded a very significant drop, of the order of -94%. In any case, this is what the ultrasound.money site displays in real time. The latter dedicated to a very maximalist vision of this network. An estimate obtained by comparing the amount of ETH that should have been issued if its blockchain was still in Proof of Work (PoW). Because in this case 140,000 units would have been created over this periodcompared to just over 8220 at present.

Measurements also confirmed over the last 24 hours. Because over this shorter period the supply of the cryptocurrency ETH recorded a rise of 0.28%, compared to an estimate of 3.80% if it was still running in its old PoW version. It is therefore obvious that the new formula of the Ethereum blockchain produces fewer units of ETH. But is this decline sufficient to make it effectively deflationary ?

Because even if it increases much less significantly ETH’s current daily issuance still remains positive, to within a few hundred units. And the main cause is obviously the sharp drop in transactions recorded on the Ethereum network, bear market obliges. All accompanied by performances in the red. With a fuck over 20% since The Merge which is not really surprising. But whatever happens, a new issuance model that could well trigger an effective scarcity of ETH once the market starts to rise again. A case to follow…

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