HomeEthereumReasons Why Ethereum Lost its Deflationary Status After the Dencun Upgrade

Reasons Why Ethereum Lost its Deflationary Status After the Dencun Upgrade

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Analysis: Ethereum Network Shifts from Deflationary to Inflationary Post-Dencun Upgrade

The Ethereum network has recently undergone a significant structural change, shifting from a deflationary status to an inflationary one, according to recent analysis from on-chain data firm CryptoQuant. This change was a result of the Dencun upgrade, which combined the Cancun and Deneb updates earlier in the year.

The Dencun upgrade introduced Proto-Danksharding and temporary data blobs for cheaper layer-2 roll-up storage, aimed at improving scalability and lowering transaction fees on the Ethereum network. However, this upgrade inadvertently led to a decrease in the total amount of fees burned, which is essential for maintaining Ethereum’s deflationary status.

Julio Moreno, the Head of Research at CryptoQuant, noted that the median transaction fee and total fees burned on the Ethereum network plummeted after the Dencun upgrade, despite significant network activity. This decrease in fees burned has resulted in the total supply of ETH increasing at the fastest daily rate since the Merge upgrade.

As a result, the Ethereum network is now experiencing inflation, with the new supply of ETH increasing at a rapid pace due to the decrease in fees burned. This structural change has raised concerns among cryptocurrency analysts and enthusiasts about the long-term implications for the Ethereum network.

Tomiwabold Olajide, a cryptocurrency analyst and experienced technical analyst, has been closely monitoring these developments. With a keen eye for cryptocurrency research and market trends, Tomiwabold provides valuable insights into the evolving landscape of Ethereum and other cryptocurrencies.

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