The token supply of Ethereum has reached its highest level since January 2023, equivalent to the level before the merge upgrade on September 15, 2022.
According to data from UltraSound Money, the current supply of Ether (ETH) is approximately 1.2 billion, which is about 383 ETH higher than the supply on the day of the merge upgrade.
Source: UltraSound Money
Jaehyun Ha, an analyst at crypto research firm Presto Research, stated in an interview with The Block that the expansion of Ether’s supply is related to the Dencun upgrade in March last year, and he believes that Ethereum’s “ultrasound money” narrative may be threatened.
Since the merge upgrade in 2022, the supply of Ether has been decreasing and reached a low point of approximately 1,200,645,000 ETH in April 2024, but it quickly rebounded and started to steadily rise (the Dencun upgrade occurred in March of the same year).
Ha explained that before the Dencun upgrade, the cost users had to pay for sending transactions on Ethereum was calculated by multiplying the Gas Price by the amount of Gas, and a significant portion of it was removed through a burning mechanism.
Ha pointed out that this change led to a decrease in the proportion of fees burned because a large amount of transaction activity shifted to blob transactions. “The decrease in fee burning means that even though overall network activity remains high or even increases, the balancing effect that previously limited the net supply of ETH is now less apparent.”
Byoungjoon Kim, a researcher at DeSpread Research, also believes that Dencun is the main cause of the expansion of Ether’s supply and mentioned that many users and liquidity have shifted to the Solana network and many Layer 2 networks that have emerged after the Dencun upgrade.
However, Ha from Presto stated that the surge in ETH supply is not an immediate concern because there has not been a decline in Ethereum network activity. However, he added, “The important ‘ultrasound money’ narrative may face threats.”
On the other hand, Kim from DeSpread believes that the continued increase in the supply of Ether may have a negative impact on the security of the network in the long term because in the Proof of Stake (PoS) mechanism, the price of Ether is directly related to network security.
Meanwhile, the Ethereum community reached a consensus on Tuesday to increase the network’s gas limit from 30 million to 36 million gas units, marking the first adjustment since 2021. The increase in the gas limit (the maximum amount of gas that can be consumed by all transactions within a single block) aims to enhance the scalability of the network. Data source.