Ethereum (ETH) was briefly deflationary. That is, more ETH was destroyed than was created as a result of the burn mechanism. Now the popularity of the network has dropped somewhat, less ether is burned at the stake and the token is therefore inflationary again.
Ether between inflation and deflation
For example, Ethereum currently continues to fluctuate a bit between inflation and deflation. The fact that the platform is now inflationary again does not alter the fact that inflation is extremely low. Where Ethereum had an inflation of more than 3 percent before the Merge, it is now only 0.08 percent per year.
Due to Proof-of-Stake, approximately 622,000 ether will be added per year. However, with the current use of the Ethereum blockchain, 530,000 ether per year go on the virtual stake. They disappear from circulation forever.
This ensures that there is currently practically no ether added and that should in theory be good for the price. Ethereum is not yet noticing much of this at the moment, but we are therefore in a difficult period for the market.
Ethereum network usage must go up
The most important thing for ETH deflation right now is that network usage needs to go back up. To achieve this, applications such as decentralized finance (DeFi) and non-fungible tokens (NFT) must regain popularity. Given the current market, it is logical that that hype is not there for a while.
Ethereum founder Vitalik Buterin also called for a shift in focus back to technology. What we often see in bear markets is that the focus on the price drops for a while and everyone goes back into build mode. That is ultimately what it takes to get Ethereum back on its feet.
So far, no application has broken through on a global scale and the search for a breakthrough application continues. No one can tell you if that application will ever be found, but that’s what makes the industry so exciting.