Is Ethereum Inflation Making a Comeback? Coin's Supply Grows by $247 Million in One Month
The increase in Ethereum's inflation is largely a result of the lack of activity on the blockchain.
Ethereum enthusiasts widely praised last year's Merge as a pivotal event that would permanently establish ETH as "ultrasound money." Ethereum's historic transition from proof of work (PoW) to proof of stake (PoS) in September last year reduced ETH issuance by 90%, and many Ethereum maximalists were convinced that the change would secure ETH's status as a deflationary currency that would only appreciate from then on.
One year later, things don't seem as certain.
Advertisement In just the last 30 days, the global supply of ETH has increased by nearly 30,000 ETH, equivalent to about $47.9 million (R$ 247 million), according to the data aggregator ultrasound.money.
This sharp increase in the amount of ETH in circulation is primarily due to an equally sharp decline in transaction activity on the Ethereum network: far fewer NFT trades and much less activity in the DeFi space.
Since 2021, the Ethereum network has been operating with a fee-burning mechanism: the more traffic on the network, the higher gas prices—required to complete transactions on the network—rise. The higher gas prices are, the more ETH is "burned" by the network or permanently removed from circulation.
Lately, Ethereum gas fees have dropped to very low levels—a typical transaction on the network currently costs 7 gwei, or just $0.24. A typical transaction on the OpenSea NFT marketplace costs about $0.94.
Compare that to just over a year ago: during the Yuga Labs' Otherside collection sale in May last year, for example, network users burned over $157 million worth of Ethereum to generate only 55,000 NFTs of virtual land deeds—an average of $2,854 just in transaction fees.