Ethereum is undergoing its most prolonged inflationary period, with over 350,000 ETH (worth around $1.1 billion) added to its supply since the March Dencun upgrade, according to Ultrasound.money data. Ethereum’s current inflation rate is 0.35%.

The increase has brought the total supply to 120.4 million ETH, leaving just under 95,000 ETH to match the levels seen at the Ethereum Merge in Sept. 2022.

ETH’s nearly two years of supply reduction have been wiped out in just seven months since EIP-4844, also known as Dencun or Proto-Danksharding.

How Dencun altered Ethereum’s supply dynamics

The Dencun update introduced significant changes that reduced Ethereum’s base fee burn rate.

By allocating specific block space for layer-2 networks to process bundled transactions, known as blobs, competition for mainnet block space was reduced. Additionally, the proto-danksharding mechanism made data availability more efficient, causing base fees to drop sharply.

These events have severely impacted the blockchain network transaction fees, resulting in Ethereum issuing more ETH than it burns in most blocks.

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Author: Oluwapelumi Adejumo