Ether will experience inflation for the first time since the merger.
Following Ethereum's much-anticipated Denkun update that went live two months ago, the supply of Ether (ETH) has stopped falling.
According to CryptoQuant data, the total supply of Ether increased from 120 million on May 7th to 120.1 million on March 12th, before the Denkun update was distributed on the main stream.
While this is a modest increase, it will be the first time since September 2022 that the long-awaited merger has transitioned Ethereum to its current proof-of-stake agreement model, when Ether's supply will change to inflation.
According to the founder and CEO of Cryptoquant, Ether's temporary loss of cryptocurrencies is not critical to the Ethereum network as its main benefits are related to decentralized applications (DApps). In a May 9 X post, Ki Young Joo wrote:
“Post-Denkun upgrade, $ETH has lost its devaluation status with reduced fees, exiting the “ultrasound currency”. Ethereum's strength is in DApps; it would be wise not to compare it to Bitcoin's healthy financial narrative.”
On September 15, 2022, the supply of Ether was initially rejected when a mechanism was introduced to permanently burn transaction fees on the network.
According to ultrasound.money, more than 419,713 Ether tokens have been burned or permanently removed from circulation.
Related: Dencun is a big step towards mass adoption: Metis CEO
The death of “ultra sound” money?
Denkun's reform ended Ether's inflation by making intermediate transaction fees four times cheaper than before, with the same network activity.
While this is an important step for the Ethereum network and its users, it could spell the end of Ether's status as a super-money, according to a May 8 report by CryptoQuant.
“Denkun's upgrade has re-inflated ETH, potentially killing the narrative of the “Ultra sound” currency, with the collateral effect of reducing the total supply of ETH to keep structurally low transaction fees burning on Ethereum.
Due to lower transaction fees, the amount of ether burned after the merger dropped to the lowest level, while the supply growth increased to the highest level after the supply update.
Related: VanEck subsidiary memecoin index up 137% year-to-date
