In the world of blockchain, every upgrade may bring about earth-shaking changes. Some time ago, the Dencun upgrade of Ethereum attracted widespread attention from the market. CryptoQuant analysts pointed out that this upgrade may put Ethereum at risk of inflation again, affecting its characteristics as an "ultra-sound" currency. So, what is going on? This article will take you to find out.

图片1. Background of Dencun Upgrade

The Dencun upgrade is a major update to the Ethereum network. In this upgrade, Ethereum aims to reduce transaction fees and improve the scalability of the network. Sounds like good news, right? But there are always two sides to the coin.

2. The ghost of inflation: Why does Dencun upgrade lead to inflation?

Inflation, in simple terms, is an increase in the money supply. In the Ethereum world, a portion of transaction fees is “destroyed”, thereby reducing the total supply of Ether (ETH). This is a good mechanism for controlling inflation, but the Dencun upgrade may change this situation.

1. Reduction of transaction costs

The Dencun upgrade reduces transaction fees by optimizing the network, which is a good thing, but it also means that less ETH is destroyed per transaction.

2. Increased online activity

As transaction fees decrease, more users may be attracted to transact on the Ethereum network, leading to an increase in network activity.

3. The disconnect between the amount of destruction and the amount of network activity

Before the Dencun upgrade, Ethereum had a higher network activity, which meant that the fees burned were higher, so the supply of ETH was lower. However, after the upgrade, the total fees burned were out of line with the network activity, causing the supply of ETH to start increasing.

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III. The impact of inflation

Inflation is generally bad news for cryptocurrencies. It can cause the value of a currency to drop, affecting investor confidence. For a network like Ethereum that aims to be an “ultra-sound” currency, inflation could hurt its long-term value.

4. Market Response

The market’s reaction to the Dencun upgrade is complex and multifaceted. On the one hand, investors are excited about lower transaction fees and improved network efficiency. On the other hand, concerns about inflation have also caused the market to be cautious.

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5. The Future of Ethereum

Despite the inflation concerns brought about by the Dencun upgrade, the future development of Ethereum is still promising. The Ethereum community and developers are constantly exploring new solutions to balance network efficiency and currency value.

The Dencun upgrade brings new challenges and opportunities to Ethereum. It is crucial for investors and users to understand the economic principles behind the upgrade and pay attention to its impact on the market. In the ever-changing world of blockchain, we need to maintain curiosity and a learning attitude to grasp the pulse of the times.