Since the Merge, the inflationary pressure on ETH has been steadily reducing, but it's too soon to know whether this will finally lead to a deflationary supply. Let's explore more in this article, "Ethereum Inflation: Is ETH inflationary or deflationary after the Merge?"
Ethereum Inflation: Is ETH inflationary or deflationary after the Merge?
The issuance of ETH was the subject of one of the most controversial conversations surrounding Ethereum's switch to a Proof-of-Stake network. The main thesis supporting the Merge was that it was meant to turn ETH into a deflationary currency.
To date, The Merge has not succeeded in turning Ethereum into a deflationary currency. The burn rate implemented with EIP-1559 has not kept up with the supply created by the PoS network.
According to data, since Proof-of-Work issuance ceased permanently, Ethereum's supply has been increasing on an hourly basis.
Before the Merge, there was inflationary pressure on the Ethereum network, as can be shown by an analysis of the network's supply and issuance.
After the beacon chain genesis event on December 1, 2020, the PoS ETH issuance started long before the Merge. However, the issuing of PoW didn't stop until September 15, 2022. On August 5, 2021, the transaction pricing system (EIP -1559), which incorporated a fixed transaction fee burnt with every block, went into effect.
The pressure on the network has grown due to this variation in implementation times.
Since the introduction of EIP-1559, ETH has only experienced deflation twice, in January and May 2022. Nevertheless, PoS was able to significantly decrease the ETH supply. The data clearly shows that a PoS system drastically reduces the supply of ETH, and also illustrates that the inflationary pressure on Ethereum has been steadily dropping since the Merge. However, we're yet to see whether the reduced pressure eventually leads to a deflationary supply.
Hopefully, I hope you understood it better, after reading the article, "Ethereum Inflation: Is ETH inflationary or deflationary after the Merge?"
