In brief
- EIP-1559 added "deflationary pressure" to ETH.
- The merge should make the asset just plain deflationary.
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Go to Alpha ReportsThere are currently over 118 million ETH in circulation. And even though there's no supply cap on the cryptocurrency, don't expect that number to get too much bigger.
According to simulations from Ethereum tracker Ultrasound Money, after the transition to proof of stake, the supply of ETH is set to decline 2% annually. If current rates hold, the blockchain will start burning more Ethereum than it produces with each new block.
At the beginning of August, Ethereum developers hit the "go" button on one of the biggest upgrades ever to the blockchain. The London hard fork included EIP-1559, an Ethereum improvement proposal that both upped the block size to help combat congestion on the network and destroyed transaction fees rather than send them to miners.
The goal was to place deflationary pressure on an asset that already has a circulating supply six times larger than Bitcoin's. That's largely been achieved. According to stats from Watch the Burn, there's been a 57% reduction in ETH issuance to date; over 1.1 million ETH have been distributed as block rewards to miners while nearly 630,000 have been burned.
Ethereum is currently on pace for -2% supply shrink a year once the PoS merge takes place in a few months.
— eric.eth (@econoar) October 26, 2021
But when Ethereum undergoes its transformation into Ethereum 2.0, the deflationary pressure (a slowing of growth) should turn into outright deflation (shrinking supply).
At the moment, Ethereum relies upon miners to validate and process transactions, just as Bitcoin does. That proof-of-work method is set to be replaced by proof of stake in the not-too-distant future, when ETH holders will lock up their coins to secure the network—and receive rewards in return. While proof of stake technically already exists on the Ethereum "beacon chain," a semi-functional chain that doesn't allow for withdrawals or applications, developers have yet to "merge" it with the proof-of-work chain.
When that happens, the threshold for reaching deflation lowers. In August, Tim Beiko, who coordinates the work of Ethereum core developers, told Decrypt that at present more ETH is being produced with each block except in cases of high congestion, when gas prices climb up to around 150 gwei. (Gwei is used to measure gas and, ultimately, the cost to use the network.) "After the merge," he said, "the base fee burns more than the new issuance at 15-45 gwei, depending on how much is staked."
Why the big change in numbers?
Simple. "The reason for that is that staking rewards are 5-10x lower than [proof-of-work] rewards," said Beiko today via Twitter. "Right now, we get 2 ETH issuance in each [proof-of-work] block. But the Beacon Chain issuance is a fraction of that...so post-merge, we only need to offset that to be deflationary."
In other words, after proof of stake, there will be less ETH created with each new block. If usage, as measured by gas prices, remains fairly steady, we'll have less ETH at the end of next year.
The exact threshold is hard to pin down, Beiko suggested, because we don't yet know how many people will stake on the network: "More people staking means more staking rewards," he said.
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FAQs
Ethereum's supply has gradually decreased since the Paris upgrade (Merge) in September 2022, when the blockchain changed its consensus mechanism from Proof-of-Work to Proof-of-Stake. The rate of decline accelerated in May 2023 before becoming more gradual.
What happens to Ethereum supply after merge? ›
The Merge took place on Sept. 15, 2022, transitioning the network from Proof of Work to Proof of Stake consensus. The shift overhauled Ethereum's fundamental tokenomics, with new daily Ether issuance falling more than 80% from 13,500 ETH to currently around 2,300 ETH.
How much will 1 Ethereum be worth in 2030? ›
Ethereum (ETH) Price Prediction 2030
According to your price prediction input for Ethereum, the value of ETH may increase by +5% and reach $ 4,306.32 by 2030.
What is the circulating supply limit of Ethereum? ›
Unlike Bitcoin, which has a limited supply, Ethereum has an infinite supply.
Is there a fixed supply of Ethereum? ›
Is there also a fixed supply of ETH? There is no fixed ETH supply, like with Bitcoin (21 million).
What is the current Unstake time for ETH? ›
Standard unstake — dynamic time depending on the Ethereum unstake queue. Currently, 13 days.
Can Ethereum still be mined after the merge? ›
What happened to ETH miners after The Merge? After The Merge, Ethereum transitioned to PoS from its current PoW model. The PoS consensus mechanism effectively eliminated mining as a way to secure the network. Miners were replaced with stakers, who lock up ETH tokens for the right to validate transactions.
Is Ethereum deflationary right now? ›
The Merge upgrade has made Ethereum deflationary, with a decreasing supply of ETH due to the PoS mechanism and the burning of transaction fees. However, there is currently no guarantee for Ethereum to remain deflationary as a drop in network activity could slow down the burn rate and make the token inflationary again.
Will Ethereum rise or fall after merge? ›
Hopes that Ethereum (ETH) would thrive after its transition from a proof-of-work (PoW) to the proof-of-stake (PoS) consensus mechanism were dashed, at least for the time being, with the coin falling 25% in the three months from the date of The Merge to the start of 2023 and only breaking past the price levels it set ...
How high can Ethereum go in 5 years? ›
By the year 2025, Ethereum is expected to reach the maximum level of $6,500 with a minimum of $ 4,500 and an average of $5,500. And by the year 2030, it is expected that it may go up to a maximum of $20,500. The current year will witness the Dencun upgrade, which is anticipated to positively boost the value of ETH.
Ethereum (ETH) Price Prediction 2024-2040
| Year | Minimum Price | Average Price |
|---|
| 2025 | $5,907.41 | $6,124.39 |
| 2026 | $8,232.18 | $8,477.15 |
| 2027 | $11,892.81 | $12,316.77 |
| 2028 | $18,352.16 | $18,968.10 |
8 more rowsUnlike Bitcoin, Ethereum has no limits on its total amount. There is a max cap on Bitcoin of 21 million, but such restrictions do not apply to Ethereum. Over 116,000,000 ETH are in circulation as of May 2021. ...
Is Ethereum an infinite supply? ›
Unlike Bitcoin that has a limited supply, the issuance of Ethereum is capped at 18 million Ethereums per year!
Why Ethereum doesn t have max supply? ›
While Bitcoin has a maximum supply of 21 million coins, Ethereum's supply is not capped. This strategic decision by Vitalik Buterin aimed to create a network with infinite coins, allowing for greater flexibility and scalability.
Will Ethereum peak again? ›
In like fashion, Ethereum, the second-largest cryptocurrency, is expected to maintain its upward trajectory and form higher highs in 2025. Moreover, with increased adoption and the demand for ETH, the ETH coin price can create a new all-time high $14,925.
Why has Ethereum gone down so much? ›
Ether's price decline today is part of a downtrend occurring within what appears to be a bull flag pattern. A bull flag pattern emerges during an uptrend when the price consolidates after a strong upward movement. This consolidation forms a descending parallel channel as the price makes lower highs and lower lows.
Why is ETH decreasing? ›
Ethereum price falls for a second consecutive day as bears ignite $91.91 million of liquidated positions. Past gains during the year's second quarter can be a positive amid uncertainty in SEC's Ethereum ETF approval.
What is going to happen with ETH? ›
Ethereum is anticipated to move to Proof-of-Stake (PoS) on or around September 15, 2022 making it more secure, less energy-intensive, and better for implementing new scaling solutions.
