Ethereum’s Inflation Rate Lowered By 80% After PoS Transition

• Ethereum’s proof-of-stake (PoS) network has been operational for over three months and the issuance rate of new coins has dropped to 0.014% per annum.
• If Ethereum remained a proof-of-work (PoW) chain, its inflation rate would have been 3.58% per year, significantly higher than the current rate.
• Since the Merge in September 2022, 2,795,773 ether or $8.78 billion in U.S. dollar value has been burned by destroying ETH.

Since Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS) consensus algorithms on September 15th 2022, the issuance rate of new coins has gone down considerably. Metrics from ultrasound.money show that Ethereum’s current issuance rate of new coins is 0.014% per annum. This is a significantly lower rate than what it would have been if Ethereum remained a PoW chain, with an inflation rate of 3.58% per year.

Since The Merge, 4,790.45 Ether or $5.7 million in value has been added to the supply. In contrast, if Ethereum had remained a PoW chain for the last 105 days, the issuance rate would have been 1,247,674.60 Ether added to the supply, amounting to more than $1.5 billion in value.

In addition to the lower issuance rate, Ethereum has a burn mechanism which serves to reduce the overall supply of the coins. Data from Dune Analytics indicates that the biggest contributor to the number of ETH burned is tied to the network fee associated with Ethereum transactions. Since the London Hard Fork of August 5th 2021, 2,795,773 Ether or $8.78 billion in U.S. dollar value has been burned by destroying ETH.

As the number of Ethereum validators is set to surpass 500,000 in 2023, the lower inflation rate will help to maintain the long-term stability of the cryptocurrency. The Ethereum network is thus ensuring that its coins remain scarce, and therefore more valuable, as the network grows and evolves.