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Ethereum Net Issuance Can Drop to -4.5% Following Merge Update: Details

Fri, 07/22/2022 - 08:33
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Arman Shirinyan
Deflation might be good thing for price but questionable decision for long-term future of network
Ethereum Net Issuance Can Drop to -4.5% Following Merge Update: Details
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Ethereum's Merge update has already been marked as a fundamental standpoint for the second biggest cryptocurrency on the market. The main reason that it is so important is a complete change of the main consensus mechanism of the network, which no longer uses mining as the main tool for moving the network in addition to pushing the deflation of ETH to new levels.

According to the declaration projection for Ethereum, Buterin's creation's deflation level is expected to almost triple as the net issuance of the asset may reach -4.5%. According to on-chain tracking services like WatchTheBurn, the current issuance stays at around 2.5%, which is 50% less than prior to the EIP-1559 update.

The negative issuance might not be so crucial right after the update as the network needs more time to redistribute itself, which is why the deflation level will most likely stay at around 1%.

Is deflation as good as everyone expects?

Most Ethereum investors and users cannot wait for deflation to accelerate on the network as it is expected to positively affect the value of ETH on the market because of the rapidly decreasing supply.

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The short-term effects of deflation might be beneficial for some investors, but future users might not be so happy about the rising prices of ETH on the market, which might be followed by the extreme spike in transaction fees.

The majority of industry experts believe that Merge will not the scalability issues of the network. With the rapid price increase of Ether, the accessibility of the network becomes questionable, and so does its scalability.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.