Here’s How Ethereum’s Upcoming Transition Will Affect Its Token Supply, According to Crypto Analytics Firm
A prominent market intelligence firm says that the amount of Ethereum (ETH) issued per block will significantly decrease after the leading altcoin transitions to a proof-of-stake mechanism.
New research from crypto analytics firm IntoTheBlock reveals what to expect from the leading smart contract platform’s upcoming merge.
“Ethereum will be migrating to proof-of-stake (PoS) [soon], an event that has been largely anticipated for many reasons. This upgrade has been under development for several years and is expected to bring forth several improvements for the Ethereum network and Ether, the asset.
One of the most impactful effects coming from the merge is that the amount of ETH issued per block will decrease by 85%-90% following the merge.”
According to IntoTheBlock, this reduction is equivalent to Bitcoin (BTC) halving three times all at once. A halving means that the reward for mining a token gets cut in half.
IntoTheBlock says that because of this, Ethereum miners “will become a thing of the past,” which will remove $20 million to $25 million worth of supply pressure entering into the market.
The crypto intelligence firm also says that ETH may become slightly deflationary after its transition due to an increase in transaction fees, but notes that going the opposite way is also a possibility.
“ETH supply is likely to decrease briefly after the merge. Transaction fees are expected to increase in the hours and days following the merge as the anticipated event is likely to drive volatility and speculation, thus burning more ETH in the process.
However, if Ethereum fees return to their 30-day average, ETH will be modestly inflationary.
For these reasons, the most up-to-date projections for ETH inflation following the merge are between -1% to +0.5%. These figures are lower than previous projections given that transaction fees have dropped 75% over the past three months.”
ETH is changing hands at $1,613 at time of writing, a 5.8% decrease on the day.
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