Ether Becomes Deflationary
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An editor at Coincrop
17 Oct 2022 | 2 min read
he number of tokens fell by 4,000 over the last week as more ether was burned while verifying transactions than was created, according to a recent report.
This last week, Ether (ETH) reached an impressive "post-Merge milestone" because for the first time since Ethereum switched to proof-of-stake (PoS), it became deflationary. According to Thursday's report by Coinbase (COIN), a major crypto exchange, this is significant news.
The note said that, over the last week, deflation set in as more ether was burned verifying transactions than was created. This led to a reduction of 0.13% in supply, this is equivalent to about 4,000 tokens.
Ether creation has fallen nearly 90% since the Merge.
The Merge was the first of five planned upgrades for the Ethereum blockchain. The main goal for this upgrade was to transition to a more energy-efficient Proof-of-Stake consensus mechanism.
Some said that when the ether supply dropped, prices should have increased (assuming demand stayed constant), but Coinbase explained that the cryptocurrency's price has actually decreased by 4% in the last week.
A project called XEN that uses Ethereum-based tokens caused ether's deflationary burn rate to increase when it resulted in a significant surge of network traffic last weekend, according to the report.
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