Ethereum’s inflation rate has surged to near pre-Merge levels, with less than 100,000 ETH needed to match the supply seen at the Ethereum Merge in September 2022. Since the Dencun upgrade in March, over 350,000 ETH worth about $1.1 billion has been added to Ethereum’s total supply. This has resulted in a current inflation rate of 0.35%.
The Dencun upgrade, also known as EIP-4844 or Proto-Danksharding, has significantly altered Ethereum’s supply dynamics. By reducing the base fee burn rate and making data availability more efficient, Ethereum now issues more ETH than it burns in most blocks. This has led to a net supply increase of over 30,000 ETH in the last 30 days alone.
The rise in Ethereum’s inflationary pressure is also attributed to the increasing ETH staking ratio. Approximately 34.7 million ETH, or about 28% of the total supply, is currently staked. This staked ETH helps secure the network and generates rewards for validators who lock up their tokens. The trend of restaking, especially with protocols like EigenLayer, further compounds the inflationary impact by generating more ETH.
Overall, the combination of the Dencun upgrade and the growing ETH staking ratio has significantly impacted Ethereum’s supply dynamics, leading to a prolonged inflationary period. While the move to Proof of Stake has strengthened network security and participation, it has also resulted in more ETH being issued, driving the inflation rate closer to pre-Merge levels.