The Impact of Dencun Upgrade on Ethereum Supply: ETH Inflation Continues

The supply of new Ether (ETH) has been on the rise since the blockchain’s Dencun upgrade in March, leading to the longest inflationary spell since the Merge in 2022. According to data from ultrasound.money, over 112,000 ETH has been added to the overall supply since April 14, signaling a significant increase in inflation.

The Dencun upgrade, which introduced nine Ethereum Improvement Proposals (EIPs) including EIP-4844, has been identified as the primary driver of this inflation. EIP-4844 introduced “blobs,” a mechanism that allows transaction data to be stored separately and temporarily, reducing fees on Ethereum layer 2 networks. Additionally, proto-danksharding was implemented to improve data availability for block space on the Ethereum mainnet.

While these upgrades have led to a reduction in transaction costs on layer 2 networks like Arbitrum and Optimism, they have also resulted in a decrease in the amount of ETH being burned on the mainnet. Despite the recent inflationary trend, the total supply of ETH has actually decreased significantly since The Merge, with over 1.5 billion ETH burned since September 2022.

This reduction in supply equates to more than $1.1 billion at current prices, highlighting the impact of the switch to a proof of stake consensus mechanism. As the Ethereum ecosystem continues to evolve, it will be interesting to see how these changes in supply dynamics shape the future of the network.