Ethereum Is in Trouble of Inflation as Supply Increases By Over $47 Million

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There was an influx of over $47 million into ETH supply.
This is causing concerns about inflation in the ETH token.

The latest development on the Ethereum network is the increment of the supply by more than $47 million. So, there are chances this could be the catalyst to cause serious inflation to the ETH token. Let’s dive into these comprehensive insights.

The Merge: Savior of the Ethereum Ecosystem

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Image from Ethereum.org

At the launch of the Ethereum Merge in 2022, many enthusiasts had very high expectations regarding the renewed network. So, there were shouts of transaction fees going lower, and of course, transactions could also go much faster than before. One of the implications of the Merge was the reduction in ETH issuance by 90%. So, many die-hard Ethereum fans said after the Merge that the ETH token will only appreciate in price after that historic event.
The reason behind their claims was Ethereum’s status changing to a deflationary token. However, one year into this historic event, things aren’t going very well. In fact, a lot of concerns are already coming regarding the sustainability of the Ethereum network due to the Merge. Furthermore, there are also concerns about inflation.

Ethereum Supply Increases By Over $47 Million

Something is happening to the Ethereum network, and not many people are talking about it. So, in the last 30 days, there was a surge in the global ETH supply by nearly 30,000 ETH, equivalent to roughly $47.9 million at press time. This is quite massive, although there are massive implications of this occurrence. So, this data is coming from on-chain data aggregator ultrasound.money.
Many things contribute to this recent development. There’s a massive decline in transaction flow on the Ethereum network. So, the number of NFT sales and DeFi activity on this blockchain ecosystem is declining at an enormous rate.

Was the Merge A Mistake?

CRYPTONEWSBYTES.COM P3PoICbzLK6ybNl_XShkWFIpBnquOMR0mJ74oKOI2P2B2sxKL3mGUgOC0yTIMih4UFNpsqDgVP9vV5NmHvTRtCxxUi8COBrV3gCB68w1J66G5rvz1vyZph7IoAUusiEABbh-50HpRWbl Ethereum Is in Trouble of Inflation as Supply Increases By Over $47 Million

Image from Ethereum.org

With the current situation, it is looking like the Merge was a mistake for the Ethereum network. So, before the Merge in 2022, the Ethereum network had a fee-burning mechanism built into the network. With this mechanism, the more transactions there are for the network to process, the more the amount of gas fees increases. So, the higher the gas fees, the more burning of ETH tokens. Note that burning means removing a token entirely from circulation.
Recently, there’s a massive drop in the amount of transaction fees for the Ethereum network. So, for the average user, this is a good situation. However, it isn’t good for the Ethereum network and ETH itself. When there are lower gas fees, there’s an increment in the amount of ETH supply. So, the implication of this is that there might be inflation for the Ethereum token.

1/9) Ethereum is becoming the antithesis of the decentralization ethos

As it is pushing people into custodian & trusted "L2 scaling" solutions

While rejecting on-chain governance in favor of a centralized & permissioned decision-making process

That is not what I signed up for!
— Justin Bons (@Justin_Bons) October 2, 2023

Concerns About Inflation

Some analysts held discussions about some of these issues in the ETH ecosystem. So, Nikita Zhavoronkov recently made a statement on Twitter explaining how the ETH network is on the path of doom. According to his post, the rise of layer 2 blockchains is the cause of the problem. So, limiting layer 1 protocols is an issue causing the risks of inflation on Ethereum.
Joe Burnett on Twitter also said the low gas fees are causing the issues on the Ethereum network. So, since the supply of this token is unknown, there needs to be high transaction fees to curb inflation.

And I'd say that the biggest threat is not the L2s themselves, but their effect on the L1. Once there's enough capital poured into centralized L2s, their investors start lobbying crippling L1.

That's what happening to both Bitcoin with its Lightning charade and, alas, Ethereum.
— Nikita Zhavoronkov (@nikzh) October 3, 2023

Conclusion

There was an influx of supply to the Ethereum network. So, there are concerns about this after more than $47 million ETH tokens entered the network within a period of 30 days. Many crypto enthusiasts expressed their thoughts about this situation, with some saying high gas fees will help curb the issue.

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