TL;DR
- Ethereum’s supply has increased significantly, surpassing pre-Merge update levels, raising concerns about supply inflation.
- The introduction of “blob” transactions in the Dencun upgrade has reduced fee burning, increasing ETH supply and potentially jeopardizing its deflationary asset status.
- Ethereum approved an increase in the gas limit from 30 million to 36 million units to improve scalability.
Ethereum’s supply has experienced a considerable rise, reaching levels not seen since before the Merge update in 2022. Currently, the supply stands at 120,521,523 ETH, surpassing the amount recorded on the day of the update by around 383 ETH. This surge has raised concerns among some analysts, who point to last year’s Dencun upgrade as a possible cause for this supply inflation.
The Dencun upgrade introduced “blob” transactions, designed to handle large data volumes more efficiently, especially for Layer 2 solutions. These transactions use a different fee unit, known as “blob gas,” which is not burned like the regular gas used in standard transactions. As a result, the amount of burned fees has decreased, which has reduced the counteracting effect that previously helped limit Ethereum’s net supply.
Is Network Security at Risk?
The reduction in fee burning has increased Ethereum’s supply, putting at risk its goal of being a deflationary asset, known for its ability to store value better than Bitcoin. While some analysts, like Jaehyun Ha from Presto Research, argue that the increase in supply is not an immediate cause for concern, given that network activity remains high, others suggest that this inflation could affect the network’s long-term security, as the relationship between Ethereum’s price and network security under the Proof of Stake (PoS) mechanism is direct.
Ethereum Increases Gas Limit
Regarding the network’s evolution, Ethereum also recently approved an increase in its gas limit, from 30 million to 36 million units. This adjustment aims to improve the network’s scalability by allowing more transactions per block.
In parallel, the Ethereum Foundation is going through a period of uncertainty regarding its leadership, with a recent unofficial vote proposing a leadership change, suggesting that Danny Ryan, a former Ethereum researcher, take the position of Aya Miyaguchi. This situation has led to the departure of several developers, including Eric Conner, who made his stance clear on social media.
