Two years and 143 days after Ethereum's transition to proof-of-stake (PoS) — known as the "Merge" — Ether (ETH) is poised to return to a net-inflationary state. This shift marks a significant turning point in Ethereum's post-Merge economic model, driven by recent protocol upgrades and shifting network dynamics.
Key Factors Driving ETH Inflation
- Impact of the Dencun Upgrade:
The introduction of "blobs" via EIP-4844 reduced Layer Two (L2) gas fees dramatically, lowering ETH burn rates. This change reversed the deflationary trend that began post-Merge. Current Supply Metrics:
- Daily ETH supply: +1,570 ETH
- Projected inflation onset: 24 hours
- Historical Context:
Post-Merge ETH supply hit a deflationary record of 450,000 ETH (worth ~$1.6 billion) before the April 2024 turnaround.
Why Inflation Isn’t All Bad
- Energy Efficiency: PoS reduced Ethereum’s energy use by 99.9%.
- Vs. Proof-of-Work: Without the Merge, ETH would have seen 3.3% annual inflation, adding 9.5 million ETH (~$25 billion today).
👉 Discover how Ethereum's Surge upgrade scales L2 networks
Ethereum’s Future: Scaling and DeFi Focus
- Gas Limit Increase: Validators recently voted to raise the gas limit for the first time since 2021, enabling more transactions per block.
- DeFi Investments: Treasury funds are being allocated to a DeFi Multisig to boost ecosystem activity.
FAQs
Q: Why did ETH become inflationary again?
A: Lower L2 gas fees (via "blobs") reduced ETH burn rates, tipping the supply balance.
Q: How does current ETH inflation compare to PoW?
A: PoW would have caused 3x higher inflation; PoS remains more sustainable.
Q: What’s next for Ethereum’s economics?
A: Focus shifts to scaling (Surge) and DeFi incentives to drive value.
👉 Explore Ethereum's roadmap for 2025