Ethereum Token Supply Reaches Highest Level Since January 2023 Amid Dencun Upgrade Impact
Ethereum Token Supply Surpasses January 2023 Levels
Ethereum's token supply has reached its highest level since January 2023, currently standing at 120,521,523 ETH. This marks an increase of approximately 383 ETH compared to the supply recorded on the day of the Merge upgrade in September 2022. The development was highlighted by Justin Bram, CEO of Astaria, who noted the significance of this growth.
Dencun Upgrade Impact on Ethereum's Deflationary Mechanism
Analysts attribute the rise in Ethereum's inflation to the Dencun upgrade, which introduced blob transactions and a separate fee unit called "blob gas." This change has reduced the proportion of transaction fees being burned, weakening Ethereum's deflationary mechanism. Prior to the Dencun upgrade, Ethereum's supply had trended downward, reaching a low of 120,064,500 ETH in April 2024. However, the supply has since climbed steadily.
Migration to Layer 2 Solutions and Network Activity
The Dencun upgrade has also led to increased migration of users and liquidity to Layer 2 solutions and alternative networks like Solana. This shift, combined with the rise of memecoin rallies, has further impacted Ethereum's supply dynamics. Despite these changes, network activity on Ethereum has remained robust.
Upcoming Pectra Upgrade and Inflation Concerns
The upcoming Pectra upgrade, expected in the first half of 2024, could further exacerbate inflation concerns. This upgrade includes an EIP that may increase the blob target and maximum limit, potentially leading to greater inflation and challenging Ethereum's "ultrasound money" narrative.
Gas Limit Increase and Scalability
Ethereum has also agreed to increase its gas limit for the first time since 2021, raising it from 30 million to 36 million gas units. This change is expected to enhance the network's scalability and accommodate growing demand.
Leadership Changes and Price Movements
Meanwhile, the Ethereum Foundation is navigating a leadership debate, with some community members advocating for a change in executive direction. Ether's price has seen a 1% increase over the past 24 hours, trading at $2,744, though it has declined by 12% over the last week.
The rise in Ethereum's token supply and the potential impact of upcoming upgrades highlight the evolving nature of the network and its ongoing efforts to balance scalability, security, and monetary policy.
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