At the beginning of 2023, Ether (ETH) has once again become deflationary. After the merger, the total amount in circulation has decreased by 3,269 ETH, compared to an increase of over 1.5 million ETH if we stick to Proof of Work. How is it explained?

Ether (ETH) deflationary again

For the first time in 2023 Ether (ETH) has turned deflationary again. In other words, it means that the current use of the Ethereum blockchain results A greater irritation of the corner than it was created to work.

As verified by the site, the current amount of Ether in circulation is 120.5 million coins. That’s exactly it 3,269 ETH less than at the time of the merger’s execution last September. Worse, the action would have resulted in evidence of consent Creation of more than 1.5 million new ETHOr $2 billion in current prices.

Low supply of ETH from the merge

In its current configuration, the operation of the Ethereum network comes as a result Production of 674,000 ETH per year For the remuneration of approximately validators while the experiment allows to burn approximately 850,000 ETH per year. It will conform 0.17% reduction in volume in circulation each year.

Note however that This data is based on the current use of blockchain And can be very different.

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How to explain the deflationary aspect of ETH?

Several factors can explain the ether’s transition to a deflationary pattern. The first is obvious Execution of merge updatesSigning the Proof of Stake by consenting to the Proof of Work. This has drastically reduced the reward of validators by eliminating miners in favor of stakers.

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Also, it should be noted Ethereum trading volumes are on the rise again From the beginning of 2023. Foremost are non-fungible tokens (NFTs), whose activity has intensified in recent days. This results in increased gas fees, part of which is burned with each transaction on the Ethereum network.

For information, Shanghai Update Next month the Ethereum testnet will be implemented and On the mainnet in the month of March 2023. This is highly anticipated as it means users will be able to withdraw Ether locked in Ethereum 2.0 smart contracts.

👉 All about Shanghai Update and next important dates for Ethereum

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