The Merge can be said to be the most important upgrade in Ethereum history to date because it changed the consensus algorithm of the world’s 2nd largest crypto network from Proof-of-Work to Proof-of-Stake. This means Ethereum no longer needs miners, cutting power consumption by up to 99% and reducing block rewards for miners. The annual inflation rate for rewarding validators will also decrease to only 0.03% instead of over 3.6% of PoW mechanism.
As reported by Ultrasound.money, since The Merge went live on September 15, the amount of newly created ETH tokens was 3,112, nearly 138 times lower than 428,327 ETH that should have been pumped into the network as block rewards for PoW miners. The Merge has clearly had a major impact on ETH supply, helping to reduce ETH’s annual inflation rate.
Combined with EIP-1559 fee burning mechanism, Ethereum supporters believe that a deflationary state, where the amount of ETH burned per day is lower than the amount generated, can happen. In the last 30 days, Ethereum has burned more than 50,223 ETH from transaction fees, mainly coming from DEX exchanges (like Uniswap, 1inch), NFT apps (OpenSea, ENS), stablecoin transactions and traditional ETH transfers.
Even so, since Ethereum’s activities have recently decreased significantly, the number of fees used was not high, leaving the network not yet reaching the expected deflationary impact. However, in the last 30 days, ETH supply growth has been negative, indicating that the impact has begun to occur.
Ethereum price after The Merge fell deeply because of the negative impact of the crypto market.
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