Ethereum is facing the return of inflation after the Dencun upgrade reduced the rate of ETH burned. According to data from ultrasound.money, the supply of ETH is now higher than before The Merge, the event that helped ETH become a deflationary asset. This is a sign that the Ethereum network may enter a challenging phase.

Ethereum is No Longer 'Ultrasound Money'?

Previously, Ethereum was praised as 'Ultrasound Money' due to its decreasing total supply thanks to the transaction fee burning mechanism (EIP-1559). When network demand is high, the amount of ETH burned will exceed the amount of newly issued ETH, making $ETH a scarce asset like Bitcoin.

However, everything changed after the #Dencun upgrade in March 2024. This improvement helps Layer-2 (L2) reduce transaction fees thanks to the blob mechanism, but at the same time reduces the amount of gas burned on the Ethereum mainnet, causing ETH to lose its inherent deflationary mechanism.

Will ETH Experience Even Higher Inflation After the Pectra Upgrade?

Not stopping at Dencun, Ethereum is set to implement the Pectra upgrade next March. #pectra will increase the number of blobs per block, continuing to help L2 expand but may also cause ETH to inflate even more.

Despite this, Ethereum's current inflation rate is still lower than Bitcoin's, as BTC has an inflation rate of about 1.43% per year since The Merge.

ETH is Losing Its Appeal in the Market

Not only facing inflation, Ethereum also encounters many other challenges:

🔹 Solana is rising strongly thanks to the booming memecoin ecosystem, attracting users from Ethereum.

🔹 The Ethereum Foundation has been criticized for continuously selling ETH and lacking changes in leadership.

🔹 ETH/BTC has dropped to a 4-year low, at only 0.028, while Bitcoin continues to maintain strong growth.

🔹 Ethereum ETFs lag far behind Bitcoin ETFs, attracting only 3.2 billion USD compared to 40.6 billion USD for BTC.

Will ETH Regain Its Position?

Despite the challenges, Ethereum is still preparing for important upgrades to optimize the network. But the question is: Can Ethereum maintain its position or will it continue to be surpassed by other blockchains? 🚀 #anhbacong