The transition to Proof-of-Stake for Ethereum has prevented a potential supply growth of $4.9 billion, according to reports. With the recent merge, Ethereum is set to become a more efficient, sustainable and secure platform, while also saving billions of dollars in potential supply growth. This transition is set to shape the future of Ethereum, as well as the wider blockchain industry.
Ethereum’s native token, Ether (ETH), has seen a significant decrease in supply since the transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanisms after “the Merge” on November 15, 2021. As per statistics data from the Ethereum monitoring site, ultrasound.money, the yearly supply of ETH has dropped by 0.146%. Over 217 days, 104,939.20 ETH, equivalent to over $200 million in the current market value, have been burned.
The decline in the overall supply of ETH would have been much higher had Ethereum continued to rely on miners for network security. If “the Merge” had not occurred, the native coin supply of Ethereum would have surged by 3.53% every year, leading to an increase of 2.5 million coins, translating to a whopping $4.9 billion in current market value.
The reduction in ETH supply was triggered by the implementation of Ethereum Improvement Proposal 1559 (EIP-1559) through the London upgrade that took place in August 2021. EIP-1559 splits transaction fees into two parts, with the base fee getting burned and the priority fee being paid to miners. However, with the transition to PoS, miners no longer exist. The implementation of EIP-1559 was designed to reduce inflation on Ethereum and induce deflationary pressure on the ETH supply.
Despite this, the total supply of ETH has increased by 3.21 million coins since the London upgrade’s implementation. However, since the Shapella upgrade, which enabled staked ETH to be withdrawn, there has been an increased burning of ETH, resulting in a decline in supply. This trend is expected to continue in the coming months.
In conclusion, the transition from PoW to PoS consensus mechanisms and the implementation of EIP-1559 through the London upgrade have led to a decline in the yearly supply of ETH. This decreased supply of ETH may have positive long-term effects, such as reduced inflation and an increase in the overall value of the cryptocurrency.
Title 1: The Post-Merge Ethereum: A Glance at the Deflationary Pressure on ETH Supply
Title 2: Ethereum Escapes $4.9 Billion in Potential Supply Growth through PoS Transition and EIP-1559 Implementation.