Ethereum Supply Post-Merge

Before the Merge:

Ethereum used Proof-of-Work (PoW), which rewarded miners with newly minted ETH for validating transactions. This resulted in a constant inflationary supply, with around 13,500 ETH minted daily.

After the Merge:

Ethereum transitioned to Proof-of-Stake (PoS), significantly reducing new $ETH issuance. Instead of miners, validators are rewarded for staking their ETH. New ETH issuance dropped by over 90%, to around 1,600 ETH per day.

Extreme Deflation:

Imagine a booming Ethereum network fueled by DeFi, NFTs, and dApps. High transaction activity triggers significant ETH burning via EIP-1559, exceeding the already reduced issuance rate. This could lead to a shrinking ETH supply, making it scarcer and potentially driving up its price, attracting more users and further fueling growth. However, this "digital gold" scenario raises concerns about: Centralization: Increased demand could concentrate ETH ownership, impacting governance. Price volatility: Fluctuations in activity and sentiment could create wild price swings.

Extreme Non-Deflation:

Alternatively, consider a stagnant Ethereum network after the initial hype. Low transaction activity limits ETH burning, and the reduced issuance rate doesn't get significantly offset. This would result in a slow but steady increase in circulating ETH, similar to pre-Merge inflation but with less dramatic price movements. While ETH wouldn't become a deflationary haven, it could offer: Stability: A reliable utility token for txs and dApps, attracting risk-averse investors. Decentralization: Wider ETH distribution could foster a more balanced governance system.

Reality Check:

Neither extreme is guaranteed. Ethereum's future supply dynamics will likely fall somewhere on a spectrum depending on factors like network adoption, tx fees, and future upgrades.

While the exact trajectory remains uncertain, the shift towards reduced issuance and burning holds potential for ETH's long-term value and stability. Ultimately, its success hinges on continued development and real-world application.