ethereum is going through its longest inflationary period, with more than 350,000 eth (worth around $1.1 billion) added to its supply since the Dencun upgrade in March, according to data from Ultrasound.money. 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 on the ethereum Merge in September 2022.
The Dencun update introduced significant changes that reduced the ethereum base fee burn rate.
By allocating specific block space for Layer 2 networks to process packaged transactions, known as blobs, competition for mainnet block space was reduced. Additionally, the proto-danksharding mechanism made data availability more efficient, causing base rates to drop dramatically.
These events have severely affected the blockchain network's transaction fees, causing ethereum to issue more eth than it burns in most blocks.
For context, ethereum burned 45,022 eth and issued 78,676 eth in the last 30 days. This resulted in a net supply increase of over 30,000 eth, underscoring the inflationary impact of the reduced base fee environment.
Bet Impact
The increase in ethereum inflation pressure is also related to the increase in the eth participation rate. David Han, Coinbase analyst <a target="_blank" href="https://www.coinbase.com/en-fr/institutional/research-insights/research/market-intelligence/eth-and-the-rise-of-l2s”>noted That while the Dencun upgrade has significantly impacted the ethereum ecosystem, the changes in the inflation rate appear to be linked to broader factors, including the growing eth staking rate, which is accelerating all token issuance.
ethereum's move to Proof-of-Stake (PoS) has strengthened the network's security and boosted participation, but it has also resulted in more eth being issued. Validators who lock their eth to secure the network earn rewards in newly minted tokens.
According to data from Dune Analytics, approximately 34.7 million eth (around 28% of the total supply) is currently in play. This staked eth helps secure the network and generate rewards, further increasing the supply of ethereum.
Furthermore, the increasing trend of retakes, especially with protocols like EigenLayer, amplifies this effect. Users who reinvest their rewards generate even more eth, compounding the inflationary impact.
