(ORDO NEWS) — ETH supply is expected to decrease after the Ethereum blockchain migrates from the existing energy-intensive proof-of-work system to the proof-of-stake algorithm.
Summary of the News
- Implemented in August, EIP-1559 added a “deflationary push” to ETH.
- When the ETH 2.0 upgrade is fully realized, it is expected that the supply of ETH will decrease directly rather than a “deflationary pressure”.
There are currently over 118 million ETH in circulation. Crypto is no limit on money supply; but don’t expect this number to grow too much anyway.
What Will Change in the Ethereum Blockchain?
According to simulations from Ultrasound Money, the supply of ETH will decrease by 2% annually after the Ethereum blockchain fully transitions to the proof-of-stake system. In this sense, the blockchain will start to burn more ETH than it produces in each new block.
At the beginning of August, the developers of the blockchain implemented one of the biggest blockchain upgrades ever. The London Update included Ethereum improvement proposal EIP-1559, which both increases the block size to help combat congestion on the network and “destroys” transaction fees instead of sending them to miners.
The main purpose with EIP-1559 was to put a “deflationary pressure” on ETH, which already has a circulating supply of six times more than Bitcoin ; this has been largely achieved. According to statistics from Watch the Burn, there has been a 57% reduction in ETH productions to date.
ETH Supply Will Decrease
But with the full transition to ETH 2.0 and a proof-of-stake system, this deflationary pressure (slowing growth) is expected to turn into full deflation (decreased supply).
Currently, Ethereum relies on miners to verify and process transactions, just like Bitcoin . This “business proof” method of location, in the not too distant future, to get the bottom of the ETH network assurance can lock their own crypto money and can win prizes in exchange for a “proof of share” system will take .
When this happens, the threshold for reaching deflation will fall. Tim Beiko, who coordinated the work of ETH core developers in August, said that as of now, more ETH is produced per block, except in high congestion situations where gas prices rise to around 150 gwei. Beiko stated that after switching to ETH 2.0, less ETH will be produced per block “depending on how much is staked”.
In other words, we will have much less ETH by the end of next year, given that usage as measured by gas prices will remain stable.
Beiko, finally, said, “It is difficult to determine the exact threshold; because we do not yet know how many people will stake ETH on the network.” he added.
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