Post-Merge Effect: Ethereum’s Extreme Reduction in The Net Inflation

The industry experts said Ether’s extreme reduction in the net inflation rate is associated with the elimination of mining rewards and the “burning” of transaction fees.

Ethereum Post-Merge Update

The second most-traded cryptocurrency, Ethereum, received all the highlights just before two-week due to the so-called transition from proof-of-work to proof-of-stake. The transition was aimed to reduce energy consumption by almost 99% as per the experts.

But now, the other concern with Ethereum is to be the greater inflation resistance, a characteristic that is generally associated with the most-traded cryptocurrency, Bitcoin. After ‘The Merge’ Ethereum’s native coin, Ether (ETH ) dropped to a range of 0% to 0.7%, estimated by Lucas Outumuro, the Senior Analyst at IntoTheBlock.

In addition, a website, Ultra Sound Money, puts the annualized inflation rate at 0.19%, which indicates some 8,397 ETH added to the total supply of Ether since the Merge.

The reduced issuance rate of Ethereum may strengthen and support its appeal among investors in the crypto and financial market.

Simon Peters, a market analyst at eToro stated on Monday that “The level of new tokens coming onto the network has substantially reduced.”

Factors Affecting Ethereum Inflation Rate

The decline in the inflation rate of Ethereum came from two factors. The first one is the reduction of new issuance that results from the change in the underlying blockchain system. On the other hand, the other is a separate mechanism known as “EIP 1559” where fees paid for transactions on the network are “burned,” or eliminated from circulation.

According to the Ethereum Foundation, the issuance of the ETH proof-of-work mining before the Merge was nearly 13,000 ETH per day. After the Merge, mining rewards vanished, and staking rewards would theoretically amount to around 1,600 ETH per day, which indicates an almost 90% drop in new issuance.

However, according to CoinMarketCap, Ethereum is currently trading at the price of 1,273.77 USD with a 7.88% decrease in the last 24 hours.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing