The total supply of Ethereum (ETH) has risen to levels not seen since the momentous Merge upgrade in September 2022.
Rise in Ethereum Supply
According to data from Ultrasound.money, Ethereum’s current supply has reached 120,521,523 ETH, surpassing the post-Merger lows by approximately 383 ETH. This marks the highest supply since January 2023, effectively reversing the deflationary trend that has followed Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism. The increase in ETH supply is largely attributed to the Dencun upgrade implemented in March 2024. Justin Bram, co-founder and CEO of Astaria, highlighted the development on X, sparking widespread discussion within the crypto community.
Dencun Update's Effect on ETH Inflation
According to Jaehyun Ha, an analyst at Presto Research, the Dencun update fundamentally changed Ethereum’s fee burn mechanism, which is a key driver of its deflationary supply dynamics. “With the Dencun update, Ethereum introduced support for blob transactions, specifically designed to efficiently process large data loads for Layer 2 (L2) networks,” Ha said. “These transactions use a separate fee unit known as ‘blob gas,’ distinct from standard gas fees.”
Shift to 'Blob Gas' and Its Consequences
Prior to Dencun, a significant portion of transaction fees were burned, reducing the supply of ETH. However, the transition to blob gas resulted in a decrease in the percentage of fees burned as a significant amount of transaction activity was shifted to blob transactions. This reduced burn effect contributed to ETH inflation even as network activity remained robust.
The increase in Ethereum supply is related to changes in fee mechanisms following the Dencun upgrade, restoring balance between inflationary and deflationary forces in the network.
