There is a significant development in the world of Bitcoin and altcoins. The supply of Ethereum ETH has experienced a significant increase for the first time since December 2022. This reversal in supply dynamics is noteworthy. It also raises questions among the cryptocurrency community and investors. What is fueling this inflationary trend for Ethereum’s native digital asset Ether (ETH)?
Factors driving Ethereum’s supply growth
Several factors are contributing to the recent increase in the supply of Ethereum ETH. The primary factor is the extremely low transaction fees on the Ethereum network. Ethereum’s gas fees remain relatively low. This also makes it cost-effective for users to transact and interact with decentralized applications (dApps) and smart contracts. This decrease in transaction costs leads to more activity on the network. Thus, it caused the daily new ETH issuance to increase.
Another factor contributing to the increase in supply is the increase in daily Ethereum issuance. Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism is the most important reason for this. This process, called Ethereum 2.0, involved significant changes in the infrastructure of the network.
Comparing Ether’s inflation with Bitcoin
It is worth noting that despite the recent increase in ETH’s supply, Ethereum’s inflation rate remains relatively low compared to Bitcoin. Bitcoin faces a steady supply. On the other hand, 21 million tokens have a limited issuance. However, ETH follows a different model. Ethereum’s net issuance currently stands at approximately 0.44% annually. This is significantly lower than Bitcoin’s annual inflation rate. As Kriptokoin.com, the latest increase in Ether supply for the first time since December 2022 is a significant development in the cryptocurrency world. This inflationary trend attracts attention. It can be attributed to several factors, including relatively low transaction fees and increased daily issuance of ETH.
However, it is worth noting that despite this rise, ETH’s inflation rate remains relatively modest, with net issuance of 0.44% annually. Compared to Bitcoin’s significantly lower inflation, this figure highlights the fundamental distinction between the two leading cryptocurrencies. ETH is experiencing a temporary increase in supply. However, the inflation rate remains below Bitcoin, underlining its unique position in the crypto world. However, it is unclear how this deflationary pattern will shape up for price. Because Ethereum is significantly lower than its peak at $4,800. Of course, we should not forget that we are also in bear season here.
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