The supply of Ethereum starts to grow again when the price of gas decreases

The volatility of supply in Ethereum is constantly increasing during this year, which has seen declines in DeFi, NFT sales, and meme coin trading.

Depending on which timeframe, Ethereum can be deflationary or InflationOn the seven-day model, Ethereum will be less, but on the annual framework, it will spend more than it burns.

What's going on with the network's supply chain dynamics, why are transaction fees decreasing, and how does it look to Ethereum's future?

As of August 2021, Ethereum is implemented. EIP-1559, Introduced the method of payment burning. Since then, the supply has a direct relationship with gas prices. A higher gas price means more ETH will be burned and vice versa.

This set the table last year Integration. Transition from Proof of work to the Stock confirmation It has reduced the supply of ETH by 90%, leading many to claim that the network is now the “ultrasound currency”.

But this account has been challenged by falling gas prices and low trading volumes.

Transaction fees for sending ETH through the protocol stand at around $0.28. according to Iterscan dataBusiness on Uniswap It currently costs $2.76—a far cry from its early September price of $4.17 and a level not seen since the FTX crash at the end of 2022.

said Chris Martin, head of research at Amberdata. Decrypt The reasons for reducing gas prices are threefold.

“The Ethereum Foundation's focus on scaling with Ethereum 2.0 has enormous benefits for the network, making it cheaper and more secure,” was his first order. Martin cited the growth of Layer-2s, explaining how the addition of these scaling solutions “took a lot of weight off the main chain.”

Third, Martin said, is a lack of narrative — something the broader crypto market has struggled with of late. “The current market has left many waiting for the next big thing,” he said, adding, “There are opportunities, only they are smaller than 2021.”

Julio Barragan, Director of Education at Block–A Web3 A tool that allows users to price, view and track transactions – he thinks the gas situation is temporary. he said. Decrypt “As volume backs up, there will be competition to block space, and the network will adjust gas prices accordingly.”

So what's to come? The future is bleak for Barragan.

“Predicting the price of Ethereum Gas is further complicated by the slow adoption of ERC-4337,” he said. Decrypt. It is also known as Account abstractionthe update looks to make crypto wallets as easy to use as email.

Barragan added that it is unclear what the long-term impact of the bill's draft and additional approval of Tier-2 will have on gas prices and therefore supply.

Lower fees may bring more users and activity on the chain, but more users ultimately lead to more congestion, he concluded.