Ethereum’s total coin issuance since switching to PoS has reached +2,317 ETH recently, Glassnode noted. This was over 84% decrement since the peak of 14.7k on Oct.
The massive drop in issuance is due to the burning mechanism whose main aim is to keep the asset on a deflationary path.
But, according to Glassnode, a total of 131,454 ETH has been issued to PoS validators, whilst 129,137 ETH has been burned via the EIP1559.
So, despite the overall drop in net issuance, the above figures suggest that the second biggest cryptocurrency might be moving towards an inflationary path.
For those who are unaware, issuing ETH entails producing new units of the cryptocurrency. Existing ETH is destroyed through burning, taking it out of circulation.
The rate of issuance and burning gets calculated on several parameters, and the balance between them determines the resulting inflation/deflation rate of ether.
Why is there a rise in issuance? Several factors comes into play with regards to the burning mechanism such as Ethereum network’s overall activity, transactions volume, and interactions with smart contracts Any anomalies between these variables can create a low volume and low number of burning activities.
This does not imply that the EIP1559 is a failure, either, as about 130,000 ETH have been taken out of circulation since Ethereum’s PoW algorithm was replaced.
In another study by Glassnode, ETH became the most deflationary amid the FTX collapse, reaching a deflationary percentage of -0.00090%, as of Nov 29. ETH has lost almost all deflationary gains.
Ethereum’s Deflationary Gains Erased
This reduction in deflationary gains equates to more than 80% retracement toward inflationary ETH percentages.
Additionally, the total amount of ETH burned using the EIP1559 BASEFREE burn mechanism has never been lower [ATL]. Not all is lost though.
The report highlighted ETH addresses with balances equal to or greater than 32 ETH are at an all-time high, despite the decline in deflationary gains and the current ATL burn volume.
That being said, the Shanghai upgrade, which will be the next important update after the merging and the transfer to proof-of-stake consensus, was announced by the Ethereum Foundation as having eight Ethereum Improvement Proposals [EIP] that would be looked into, TronWeekly reported the other day.