ETH Reverts to Inflationary Asset Following Fee-Reducing Dencun Upgrade

A recent analysis by CryptoQuant indicates that Dencun’s transactions on Ethereum have resulted in an average fee reduction by a factor of four compared to previous levels. Consequently, the quantity of Ether being destroyed through transaction fees has reached one of the lowest points since The Merge. Additionally, Ethereum’s supply growth rate is currently among the fastest seen since 2022.

In the year 2022, Ethereum underwent The Merge – a significant transformation. It transitioned from a blockchain relying on proof-of-work to one based on proof-of-stake. Simultaneously, the London upgrade was already in effect, which introduced an mechanism burning part of each transaction fee (the base fee). Consequently, Ethereum tokens were taken out of circulation and resulted in deflationary pressure.

As a data analyst, I would describe it this way: In the latest update, referred to as Dencun, there’s a new feature called “dark shanking.” This enhancement significantly boosted the performance of block storage while reducing costs associated with layer-2 networks for me.

As a crypto investor, I’ve noticed an interesting development with Ether since the Merge in September 2022. Initially, it appeared to be a deflationary asset due to the decrease in its total supply from approximately 120.491 million to 120.097 million tokens. This reduction was primarily driven by the burning of transaction fees within the network.