The volume of Ethereum (ETH) in circulation has been reported to have reduced by 100,000 coins post-the Merge.
The Ethereum tracking website, ultrasound.money reported that Ethereum’s coin supply has been down by 0.146% per year since the Merge. Over the past 218 days, Ether supply reduced by 105,190 coins, which is more than $200 million at the current price, according to ultrasound.money.
Furthermore, the website reports that $1.2 billion is being taken from the ether supply during the same time period. Apparently, if the Merge were not to have occurred, the amount of ether in circulation would have increased by more than 2.52 million coins, or $4.9 billion.
The Purpose of The Merge
Notably, the Merge effectively replaces the Proof-of-Work (PoW) with the Proof-of-Stake (PoS) algorithm, transforming Ethereum into a completely PoS-based blockchain. This is projected to lower energy usage and transaction fees greatly while boosting network security and efficiency.
Previously, Ethereum relies on a PoW algorithm to validate transactions and create new blocks on the blockchain. This method involves miners competing to solve complex mathematical problems, which necessitates a large amount of computer power and energy consumption
Factors Contributing to the Decrease in Ether Supply
While the decline in Ether’s supply has been linked to the Merge, other variables may have played a role. For instance, the Ethereum 1559 proposal which is designed to make transactions on Ethereum more efficient has also been reported to have implemented the burning of Ether.
Additionally, as more people use Ethereum and demand for the cryptocurrency grows, the number of usable tokens may decrease, potentially leading to a price hike.
The Process of Burning Ether
Ether burning refers to the act of eliminating or withdrawing Ethereum from circulation. This can be accomplished in a variety of ways including sending Ethereum to an invalid address, smart contract burns, and proof of burn.
Interestingly, burning Ether can have various benefits for the network, including lowering inflation and boosting scarcity. However, there are also negative implications, such as a decrease in network liquidity.
Recovery of Ethereum Transaction Activities
Dune Analytics claims that the cost of Ethereum transactions has been rising since January. Similarly, Non-fungible token (NFT) operations on the Ethereum network have begun to improve. Although it has not yet reached the all-time high of 2021, it signals the resurrection of on-chain operations.
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