Ethereum fans widely hyped last year’s merge as a decisive event that would permanently establish ETH as “ultrasound money.” Ethereum’s historic transition from proof of work to proof of stake last September reduced ETH issuance by 90%; many so-called Ethereum maximalists were convinced the change would clinch ETH’s status as a deflationary currency that would only, thereafter, appreciate in value. 

A year later, things aren’t looking so certain.

In the last 30 days alone, global ETH supply has surged by nearly 30,000 ETH, equivalent to roughly $47.9 million at writing, according to data aggregator ultrasound.money. That sharp uptick in the amount of ETH in circulation is mostly thanks to an equally stark decline in transaction flow on the Ethereum network: far fewer NFT trades, and much less DeFi activity. 

Since 2021, the Ethereum network has operated on a fee-burning mechanism: the more traffic on the network, the more gas prices—which are required to complete on-chain transactions—rise. The higher gas prices are, the more ETH is “burned” by the network, or permanently removed from

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Author: Sander Lutz

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