The Merge has brought positive changes to Ethereum’s energy consumption and now it’s having a direct impact on the supply of ether.
The switch from proof-of-work to proof-of-stake has resulted in a reduction of over 100,000 coins in the last 217 days. If Ethereum had remained secured by miners, the supply of ether would have increased by more than 2.52 million coins.
However, with The Merge in effect, Ethereum’s native-coin supply has been reduced by 0.144% per year, and $1.2 billion is being removed from the ether supply over the same timeframe.
Ethereum Improvement Proposal 1559 (EIP-1559) implemented through the London upgrade was responsible for the burning of ether, which further reduced the supply of the token.
The proposal split transaction fees into a base cost and a priority fee, with the former being burned while the latter served as payment to miners. EIP-1559 has created deflationary pressure on the ether supply as the base fee is burned and can no longer be used on the network, reducing the amount of inflation on the Ethereum network. Since the London upgrade, the total supply of ether has increased by 3.21 million coins.
The recent Shapella upgrade has also increased the burning of ether as staked ether withdrawals have been enabled.
While The Merge has been instrumental in reducing the environmental impact of Ethereum, the decrease in the supply of ether due to the burning of tokens may have implications for its value in the future.
However, the move towards a more eco-friendly and sustainable model has been widely welcomed by the Ethereum community.
