Growing Ethereum Availability Coincides with Gas Price Decline
The dynamics of Ethereum’s supply have been significantly impacted by the fluctuating trends in DeFi, NFT sales, and meme coin trading this year.
Depending on the timeframe considered, Ethereum’s supply can be either deflationary or inflationary: on a weekly basis, Ethereum becomes scarcer, but on an annual scale, it issues more than it burns. This fluctuation is closely tied to the network’s transaction fees. With higher gas prices leading to more ETH being burned and vice versa. A relationship established with the implementation of EIP-1559 in August 2021. The transition from proof-of-work to proof-of-stake. Reducing ETH issuance by 90%, marked a significant shift, earning Ethereum the moniker of “ultrasound money.” However, this label has been challenged as gas prices have decreased alongside declining transaction volumes.
Transaction fees, notably on platforms like Uniswap, have dropped considerably, indicating a shift in the network’s dynamics. Chris Martin, Amberdata’s head of research, unveiled three factors contributing to the decline in gas prices, reshaping Ethereum’s economic landscape.
Clever Robot News Desk 2nd October 2023
