The annual change in Ethereum (ETH) token supply has fallen from 3.79% to 0.20% after the merger, according to data from ultraschall.geld.
After upgrading the network on September 15, Ethereum switched from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) consensus mechanism, helping the network reduce its carbon footprint by 99.95% to reduce.
In addition to the reduction in energy consumption, Ethereum’s daily token issuance has also fallen sharply. Daily output refers to the total amount of new tokens created to reward a network’s block miners or validators.
After the merger, the network created 4,581.26 new Ethereum, representing a massive 95% reduction in emissions compared to the legacy PoW chain.
Under the PoW mechanism, Ethereum would have spent almost 88,736.70 Ethereum, according to data from ultrasound.money.
Chart showing how ETH has changed deflationary post-merge. Source: Ultrasound Money.
Ethereum initiates the deflationary mechanics
Ethereum is considered deflationary when the number of tokens issued per day is less than the amount burned (another way of saying, permanently destroyed). The firing mechanism was introduced back in August 2021 via the EIP-1559.
Under EIP-1559, miners only receive a portion of transaction fees, with the rest being burned and removed from the offering. Since the EIP, more than 2.6 million tokens worth just over $8.55 billion have been burned.
Still, Ethereum remained inflationary, producing more tokens than it destroyed under the PoW mechanism. However, after the merge, the network’s daily issuance has dropped to ~772 tokens per day, compared to ~12,500 before the upgrade.
As of this writing, ETH remains slightly inflationary as the amount of Ethereum being destroyed by fees is less than the amount being created.
Decreasing supply hasn’t helped Ethereum’s price either. Since the merger, the native token is down 22%, according to data from CoinGecko.
The second largest cryptocurrency by market cap is currently trading at $1,267.