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Ether Becomes Deflationary for First Time Since the Merge: Coinbase
The number of tokens fell by 4,000 over the last week as more ether was burned verifying transactions than was created, the report said.
By Will Canny
Updated Apr 9, 2024, 11:13 p.m. Published Oct 13, 2022, 10:35 a.m.
Ether reached a “post-Merge milestone” this week as it became deflationary for the first time since the Ethereum blockchain switched to proof-of-stake (PoS), crypto exchange Coinbase (COIN) said in a report Thursday.
It became deflationary as more ether was burned verifying transactions than was created in the same period, which led to a reduction of 0.13% in supply over the last week, equivalent to about 4,000 tokens, the note said.
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The rate of new ether creation has fallen by nearly 90% since the Merge, the note added.
CoinDesk Special Coverage: The Ethereum Merge
The Merge was the first of five upgrades planned for the Ethereum blockchain and involved the transition to a more energy-efficient PoS consensus mechanism.
Some argued that a drop in the supply of ether should have resulted in higher prices (assuming demand stays constant), but Coinbase noted that the price of the cryptocurrency has fallen about 4% in the last week.
An Ethereum-based token project called XEN triggered ether’s deflationary burn rate when it fueled a large spike in network traffic last weekend, the report said.
Read more: Morgan Stanley Says Crypto Ecosystem Is Becoming Less Decentralized
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