Ethereum's Dencun Upgrade: Examining Its Impacts on Circulating Supply

Friday, 10 May 2024, 14:23
Following the recent Dencun upgrade, Ethereum's circulating supply saw a noticeable increase, turning the cryptocurrency inflationary after being in a deflationary state since January 2023. The upgrade, aimed at reducing transaction costs on Ethereum's Layer-2 through 'proto-danksharding,' has generated significant discussions in the cryptocurrency community regarding its implications on the network's supply dynamics. While the upgrade makes Ethereum more efficient and cost-effective for users, it also affects the deflationary mechanism previously set by the network, calling for a deeper analysis of its potential consequences on Ethereum's future.
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Ethereum's Dencun Upgrade: Examining Its Impacts on Circulating Supply

Ethereum's Circulating Supply Impact

Ethereum's (ETH) circulating supply has increased by over 37,000 ETH in the last 30 days following the Dencun upgrade. This resulted in a 0.38% monthly inflation for the leading Web3 network, which has been deflationary since January 2023.

The Dencun Upgrade and Transaction Costs

The Ethereum network activated the Dencun upgrade on March 13, 2024, significantly reducing transaction costs through 'proto-danksharding.'

Effects of the Upgrade

The recent upgrade has sparked debates on Ethereum's supply dynamics and its impact on the 'ultra sound money' concept that emerged post 'The Merge' upgrade.

CryptoQuant Analysis

CryptoQuant's analysis reveals a shift in Ethereum's transaction fees and network activity post the Dencun upgrade, challenging the deflationary mechanism implemented previously.

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