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There has been a massive decrease in ETH issuance since the Ethereum network completed the Merge, transitioning to the POS mechanism.
Issuance of Ethereum’s native token ETH has seen a 98% decrease since the Merge on September 15th. Furthermore, the value of ETH has also dropped 20% since the network’s transition to proof-of-stake (PoS).
A number of analysts previously predicted an increase in the asset’s price after the Merge. However, this has not proven to be so. As of press time, ETH is changing hands just north of $1,000.
The substantial decrease in ETH issuance means the popular crypto asset could soon be in danger of becoming deflationary. However, as it stands, the volume of issuance still exceeds that of burned ETH. In the last 24 hours, around 519 ETH tokens were burned, but the Ethereum network still issues around 772 ETH tokens on a daily basis. BitMEX co-founder Arthur Hayes previously opined that Ethereum did not need to become deflationary post-Merge. He also stated that the popular blockchain’s goal of becoming a “decentralized computer” could suffer a setback if it experiences a major price hike. According to Hayes, the focus should be on reducing Ethereum’s inflation following the PoS mainnet transition.
Meanwhile, the head of research at IntoTheBlock, Lucas Outumoro, predicted that ETH may become slightly inflationary post-Merge if demand stays low. In a Twitter statement, Outumoro explained:
“Overall, the merge will have a large impact on ETH supply by reducing issuance by 85%-90%. It is likely that this will lead ETH to be initially deflationary following the merge. However, if demand remains at low levels, it will be slightly inflationary.”
Amid Issuance Decrease, ETH Token Supply Grows Post-Merge
Since its transition, Ethereum’s token supply has grown by 7,385.47 ETH. This pales in comparison to the potentially redeemable 128,422.13 ETH , if the blockchain was running on the proof-of-work (PoW) module.
ETH supply is up 0.34% in the last 24 hours. Under the PoW operational module, the digital currency’s supply would have been 3.86% higher over the same period.
In addition to the transition to PoS, some are also attributing the decline in token issuance to a number of other factors. One of such factors is reduced activity on the Ethereum blockchain, which also implies a corresponding reduction in gas fees.
On the flip side, some would argue that Ethereum activity also declined before the Merge, but still saw more token issuance in that time.
Ethereum ceded all the minor gains it recorded in the buildup to the Merge. The leading altcoin is now trading at levels not seen since July, in the aftermath of the crypto market crash.
Almost two weeks ago, the Ethereum mainnet successfully transitioned from the energy-intensive PoW mechanism to the ‘greener’ PoS. At the time, one of the developers who worked on the Merge took to Twitter to express enthusiasm at the development, saying:
“We merged! What a surreal feeling after working on the beacon chain for two years and the merge for two years. This was the most complex project I’ve ever participated and it wouldn’t have been possible without all the brilliant minds. History was made today! Congrats!”