Ethereum

Merge

when

Metis

The Ether (<a href="https://cointelegraph.com/ethereum-price" rel="noopener noreferrer nofollow">ETH</a>) supply has ceased to be deflationary following Ethereum’s highly anticipated Dencun upgrade that went live two months ago.
Total Ether supply increased to 120.1 million on May 7, from 120 million on March 12, before <a href="https://cointelegraph.com/news/dencun-upgrade-live-ethereum-mainnet" rel="noopener noreferrer nofollow">the Dencun upgrade</a> was rolled out on mainnet, according to C<a href="https://cryptoquant.com/community/dashboard/663b98328403fa3034f40749" target="_blank" rel="noopener noreferrer nofollow">ryptoQuant</a> data.
While this is a small increase, it marks the first period when Ether supply turned inflationary since September 2022, when the much-anticipated Merge transitioned Ethereum to its current proof-of-stake consensus model.
<figure><img src="https://s3.cointelegraph.com/uploads/2024-05/e0944715-d5e5-4217-81dd-0ae04beb806d.png" alt="" title="">
 <figcaption style="text-align: center;">Ethereum: Total Supply and Fees Burned. Source: C<a href="https://cryptoquant.com/community/dashboard/663b98328403fa3034f40749" target="_blank" rel="noopener noreferrer nofollow">ryptoQuant</a>
 </figcaption>
</figure>
Ether temporarily losing its deflationary status is not critical for the Ethereum network since its main benefits are more related to decentralized applications (DApps), according the founder and CEO of Cryptoquant. In a May 9 X <a href="https://twitter.com/ki_young_ju/status/1788531635677479323/photo/1" target="_blank" rel="noopener noreferrer nofollow">post</a>, Ki Young Ju wrote:
<blockquote data-ct-non-breakable="true">
 “Post-Dencun upgrade, $ETH lost deflationary status with reduced fees, departing from “ultrasound money.” Ethereum’s strength lies in DApps; it’s wiser not to compare it to Bitcoin’s sound money narrative.”
</blockquote>
<figure><img src="https://s3.cointelegraph.com/uploads/2024-05/fb6fc7e6-041e-439b-88b1-f02281bd61ce.jpeg">
 <figcaption style="text-align: center;">Ethereum Total Transactions and Fees Burned. Source: <a href="https://twitter.com/ki_young_ju/status/1788531635677479323/photo/1" target="_blank" rel="noopener noreferrer nofollow">Ki Young Ju</a>
 </figcaption>
</figure>
Ether supply first turned deflationary after <a href="https://cointelegraph.com/explained/what-are-the-risks-of-the-ethereum-merge" rel="noopener noreferrer nofollow">the Merge</a> on Sept. 15, 2022, when a mechanism that permanently burned transaction fees on the network was introduced resulting in a decreasing Ether supply.
Over 419,713 Ether tokens were burned, or permanently removed from circulation, since the Merge, according to <a href="https://ultrasound.money/" target="_blank" rel="noopener noreferrer nofollow">ultrasound.money</a>.
<figure><img src="https://s3.cointelegraph.com/uploads/2024-05/94441113-9397-4358-bae0-8b97b721b05b.png">
 <figcaption style="text-align: center;">Source: <a href="https://ultrasound.money/" target="_blank" rel="noopener noreferrer nofollow">ultrasound.money</a>
 </figcaption>
</figure>
Related: <a href="https://cointelegraph.com/news/dencun-big-step-mass-adoption" rel="noopener noreferrer nofollow">Dencun is a big step towards mass adoption: Metis CEO</a>
<h2 id="the-death-of-ultra-sound-money">The death of “ultra sound” money?</h2>
The Dencun upgrade has ended Ether’s inflationary streak by making median transaction fees as much as four times cheaper than before, with the same level of network activity.
While this is a significant step for the Ethereum network and its users, it could spell the end of Ether’s status as ultra-sound money, according to a May 8 <a href="https://cryptoquant.com/insights/research/663ba2e63620712660e86f3a-08-May-2024-Ethereum-The-Death-of-Ultra-Sound-Money" target="_blank" rel="noopener noreferrer nofollow">report</a> by CryptoQuant.
<blockquote data-ct-non-breakable="true">
 “The Dencun upgrade has made ETH inflationary again, potentially killing the narrative of “Ultra sound” money as a structurally lower amount of transaction fees burned on Ethereum have had the corresponding effect of not decreasing the total supply of ETH to keep it deflationary.”
</blockquote>
Due to lower transaction fees, the amount of Ether being burned has declined to its lowest levels since the Merge, while supply growth has risen to its highest level since the upgrade.
Related: <a href="https://cointelegraph.com/news/marketvector-memecoin-index-surges-2024" rel="noopener noreferrer nofollow">VanEck subsidiary’s memecoin index up 137% year-to-date</a>

Ether turns inflationary for the first time since Merge

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