This summary text is fully AI-generated and may therefore contain errors or be incomplete.
The Ethereum Inflationary Trend
Background
Ethereum has been experiencing an extended period of inflation since the Merge in September 2022, with the circulating supply of ether steadily increasing for almost 72 days.
Causes of Inflation
- Decrease in Ethereum’s base fee
- Surge in Ethereum mainnet transactions
- Exponential growth of layer-2 activity
Comparison with Deflationary Trend
This inflationary trend contrasts with the deflationary trend that followed the Merge, where Ethereum’s base fee was burned, reducing the total supply of ETH.
Transition from Proof of Work to Proof of Stake
Prior to the Merge, Ethereum operated on a proof-of-work model, where miners received block rewards for discovering blocks. However, the transition to proof of stake post-Merge led to the burning of base fees, with validators receiving a combination of priority fees, reduced block rewards, and additional MEV yield.
Net Reduction of ETH
Despite the recent inflationary trend, Ethereum has burned a substantial amount of supply since the Merge, resulting in a net reduction of 346,000 ETH.
Implications and Conclusion
While the recent inflationary period has diluted the value of ETH slightly, the overall impact remains advantageous for holders. The evolving dynamics of Ethereum’s supply and inflationary trends underscore the complex interplay between network updates, transaction activity, and fee structures.
📎 Read the original article on blockworks.co
