Annual Inflation Ethereum Drops 95% After Merge

Ethereum’s (ETH) annual inflation is after the Merge failed from 3.79 percent to 0.20 percent. The network made the transition to Proof-of-Stake on September 15, and far fewer new ethers have been put into circulation since then.

Is ether ‘harder’ than bitcoin?

Since the Merge, 5,173 new ethers have been printed, compared to more than 100,000 with Proof-of-Work. This brings ether’s annual inflation to 0.20 percent, marking a massive drop from the 3.79 percent level prior to the Merge. Bitcoin can’t match ethereum either, because bitcoin has to make do with an inflation of 1.72 percent.

Incidentally, not only has the inflation of ethereum fallen sharply, energy consumption has also decreased by 99.95 percent since the Merge. Two factors that, if it were up to Ethereum’s supporters, should ultimately push the project to the forefront of the industry.

It still needs a lot of work, because the market cap of bitcoin is still more than twice that of ethereum today. Bitcoin has a market cap of $371 billion, while Ethereum currently has to make do with $164 billion.

Not inflationary, but deflationary?

Most Ethereum influencers had hoped that the post-Merge project would be not inflationary, but deflationary. That means that even ethers disappear on a daily basis, instead of recovering as is the case now. To achieve that, transaction costs have to go up, because that means more ethers going on the digital pyre.

Some time ago, the upgrade under the name EIP-1559 was baked into the protocol. This ensures that part of the transaction costs do not go to validators, but are destroyed for good. Since this upgrade went live, more than $8.55 billion worth of ethereum tokens have been withdrawn from circulation.

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Despite this, Ethereum is still inflationary and tokens are added on a daily basis, although the average of 772 new tokens post-merge is well below the 12,500 pre-merge tokens. Strangely enough, the ethereum price has not yet been helped, it has lost 22 percent after the Merge.

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