According to data from ultrasound.money, the annual token supply change for Ethereum (ETH) has decreased from 3.79% to 0.20% since the Merge.
Ethereum switched from a proof-of-work (PoW) consensus process to a proof-of-stake (PoS) consensus after the network upgrade on September 15, assisting the network in reducing its carbon footprint by 99.95%.
Ethereum has decreased its daily token issuance in addition to using less energy. The total number of new tokens produced each day to compensate a network’s block miners or validators is referred to as daily issuance.
As a result of the merge, the network has produced 4,581.26 new Ethereum, a drastic 95% decrease in issuance when compared to the outdated PoW chain.
According to information from ultrasound.money, Ethereum would have issued close to 88,736.70 Ethereum under the PoW protocol.
If the number of tokens issued per day is less than the amount burned, Ethereum will be considered deflationary (another way of saying destroyed permanently). In August 2021, the EIP-1559 introduced the burn mechanism.
Miners are only paid a portion of transaction fees under EIP-1559, with the remainder burned and removed from the supply. More than 2.6 million tokens worth slightly more than $8.55 billion have been burned since the EIP went live.
Nonetheless, Ethereum remained inflationary, creating more tokens than it destroyed via the PoW mechanism. However, since the merge, the network’s daily issuance has dropped to 772 tokens per day, down from 12,500 before the upgrade.
As of this writing, ETH is still slightly inflationary because the amount of Ethereum destroyed through fees is less than the amount created.
The decreasing supply hasn’t helped Ethereum’s price either. According to CoinGecko data, the native token has dropped 22% since the merge.
The market capitalization of the second-largest cryptocurrency is currently $1,267.