The token supply of Ethereum has reached its highest level since January 2023, comparable to the level before the merge upgrade on September 15, 2022.
According to data from ultra sound money, the current supply of Ether (ETH) is approximately 1.205 billion, which is about 383 ETH higher than the supply on the day of the merge upgrade.
Source: ultra sound money
Jaehyun Ha, an analyst at cryptocurrency research firm Presto Research, stated in an interview with The Block that the expansion of Ether’s supply is related to the Dencun upgrade in March last year, and he believes that Ethereum’s “ultrasound money” narrative may be threatened.
Since the merge upgrade in 2022, the supply of Ether has been decreasing, reaching a low of about 1,200,645,000 ETH in April 2024, but it quickly rebounded and started to rise steadily (the Dencun upgrade occurred in March of the same year).
Ha explained that before the Dencun upgrade, the cost users had to pay when sending transactions was calculated by multiplying the Gas Price by the amount of Gas, a significant portion of which would be removed through a burning mechanism.
Ha pointed out that this change led to a decrease in the proportion of fees being burned, as a large amount of transaction activity shifted to blob transactions, “the decrease in fee burning means that the balancing effect that previously restricted the net supply of ETH is now less apparent, even though overall network activity remains at a high level or is increasing.”
Byoungjoon Kim, a researcher at DeSpread Research, also believes that Dencun is the main cause of the expansion of Ether’s supply and mentioned that many users and liquidity have shifted to the Solana network and the many Layer 2 networks that have emerged after the Dencun upgrade.
However, Ha from Presto stated that the surge in ETH supply is not an immediate concern because there has not been a decline in Ethereum network activity. However, he added, “the important ‘ultrasound money’ narrative may face threats.”
On the other hand, Kim from DeSpread believes that the continuous increase in Ether’s supply may have a negative impact on the network’s security in the long term, as the price of Ether is directly related to network security in the Proof of Stake (PoS) mechanism.
Meanwhile, the Ethereum community reached a consensus on Tuesday to increase the gas limit of the network from 30 million to a maximum capacity of 36 million gas units, the first adjustment since 2021. Increasing the gas limit (the maximum amount of gas that can be consumed by all transactions in a single block) aims to enhance the scalability of the network.
Data source.
