After Ethereum shifted from proof-of-work to proof-of-stake in 2022, it has transformed into a deflationary asset. The total circulating supply of Ethereum (ETH) now stands at 120,105,358 ETH, a decrease of 415,680 ETH from pre-merge levels.
In the past 30 days, Ethereum’s supply dynamics have changed, with 35,548.72 ETH burned and 75,072.43 ETH issued as block rewards to validators. This resulted in a net supply increase of 39,523.71 ETH during this period, leading to an annualized inflation rate of approximately 0.4%, according to data from Ultrasound Money.
In contrast, Bitcoin’s inflation rate is currently at 1.068%, while Ethereum’s pre-merge inflation rate would have been much higher at 3.74%. If the current 30-day rate continues, projections suggest that around 433,000 ETH will be burned and 914,000 ETH will be issued in the next year, resulting in a net gain of 481,000 ETH.
Data from OKLink shows a decline in ETH burned since March, with only around 900 ETH being burned daily since the start of May, the lowest average levels post-merge.
The recent Dencun upgrade on the Ethereum network has impacted the ecosystem by reducing layer-2 transaction fees and overall network activity, leading to a decrease in Ethereum’s burn rate and pushing its supply back into an inflationary state. Gas fees have also dropped to around 5 gwei, the lowest on record according to data from Etherscan and Ycharts.
Ethereum’s inflation rate has neared that of Bitcoin, especially after Bitcoin’s halving event last month. In the past week, Ethereum’s inflation rate stood at 0.54%, slightly higher than Bitcoin’s post-halving rate of 0.83%. The inflation rate has been increasing since February when it hit a local low of -2%.
While Ethereum’s supply has become slightly inflationary in the short term due to reduced network activity and burn rate, its overall supply is still decreasing due to mechanisms introduced by EIP-1559. The future of Ethereum’s inflation rate and supply dynamics will depend on network upgrades and adoption trends in the ecosystem.
