HomeEthereumCryptoQuant Explains Why Ethereum is Now a Non-Deflationary Network

CryptoQuant Explains Why Ethereum is Now a Non-Deflationary Network

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Is Ethereum Still a Deflationary Network?

Title: Ethereum’s Deflationary Narrative Shattered with Latest Upgrade

In a surprising turn of events, Ethereum, once hailed as a deflationary network, has lost its ultrasound money narrative following the Dencun upgrade. This upgrade, implemented in March, significantly reduced transaction fees on the blockchain, leading to a reversal in Ethereum’s deflationary trend.

The ultrasound money narrative positioned Ethereum as a network that could maintain its purchasing power over time and resist inflation, similar to Bitcoin’s sound money principle. Previous upgrades such as the London upgrade and the Merge had successfully reduced the issuance of new ETH and exerted deflationary pressure on the network.

However, the Dencun upgrade changed the game by slashing transaction fees on Ethereum layer-2 chains and introducing danksharding for more efficient data storage. This reduction in fees has led to a decrease in the amount of ETH burned, despite high network activity, ultimately making Ethereum no longer deflationary.

According to CryptoQuant analysts, Ethereum’s supply of ETH has become positive again, marking the highest daily rate since the Merge. The amount of fees burned has also plummeted significantly, signaling the end of the ultrasound money narrative for Ethereum.

With the current rate of network activity, Ethereum is unlikely to return to its deflationary state unless there is a substantial increase in network activity. The once-promising narrative of Ethereum as ultrasound money has now been called into question, leaving developers and analysts to reassess the network’s monetary principles.

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