The world of cryptocurrency has witnessed a landmark move, as the supply of Ethereum was reduced by 66,000 ETH in 2023, according to market intelligence platform IntoTheBlock. This development has been attributed to Ethereum’s ‘Merge’ transition to proof-of-stake (PoS) consensus that was implemented in September 2022. With the new consensus mechanism, a fraction of ETH transaction fees are being burnt, thus making Ethereum deflationary.
For the uninitiated, a deflationary currency implies that the supply of currency decreases over time, as opposed to an inflationary currency in which the supply of currency increases over time. Cryptocurrency enthusiasts who prioritize scarce digital assets are highly attracted to deflationary currencies. They believe that scarcity can drive up the value of an asset.
The reduction of Ethereum supply is considered great news for crypto enthusiasts who seek scarce digital assets. The deflationary characteristic of Ethereum is anticipated to enhance the value of the cryptocurrency in the long run. Ethereum is the second highest market capitalization cryptocurrency on the market behind Bitcoin.
Ethereum Improvement Proposal (EIP) 4895 is another highly anticipated Shanghai-Capella upgrade, popularly known as the Shapella upgrade, which is scheduled to occur on April 12, 2023. The implementation of this upgrade will introduce validator staking withdrawals to the main network. The Shapella upgrade is a crucial feature that was neglected during Ethereum’s shift to proof-of-stake (PoS) consensus in September 2022, following the Merge upgrade.
As of the time of writing, Ethereum is priced at $1,816.52 per coin. The asset’s price registered solid growth in the last 7 days, rising by 26%. The price surge is attributed to the reduced supply of Ethereum and the implementation of new upgrades.
Ethereum, an open-source, decentralized blockchain technology, was first introduced in 2015 by Russian-Canadian programmer Vitalik Buterin. It functions much like Bitcoin, in that it enables the recording and verification of transactions without relying on a central authority. Ethereum has gained widespread popularity over the years, with its native cryptocurrency ETH being used for transactions in the Ethereum network.
With Ethereum’s transition to proof-of-stake (PoS) consensus, it becomes more energy-efficient, which significantly reduces transaction fees. The PoS mechanism requires the verification of transactions not by solving complex mathematical problems but through a person or entity’s stake in the network. In contrast, the Bitcoin network relies on proof-of-work (PoW) consensus, which consumes significant amounts of energy, making it less environmentally friendly.
The proof-of-stake consensus mechanism enhances the decentralization of the Ethereum blockchain by allowing anyone who has staked their cryptocurrency to participate in transaction verification. Additionally, the proof-of-stake consensus mechanism ensures the security of the Ethereum blockchain network by making it more challenging for fraudulent activities to occur.
The Ethereum community is excited about the ongoing developments on the Ethereum blockchain network, as they promise to improve the Ethereum network’s functionality and efficiency. The Ethereum network intends to become the facilitator of future decentralized applications, promising to offer users greater functionality and convenience than other cryptocurrency networks.
In conclusion, the recent reduction in Ethereum’s supply is a significant development in the world of cryptocurrency, promising to enhance the scarcity and value of ETH. The upcoming Shapella upgrade is set to introduce validator staking withdrawals to the main network, a feature that was initially excluded during the transition to proof-of-stake consensus. As the Ethereum blockchain network continues to evolve with new upgrades and developments, it cements its position as a major player in the world of cryptocurrency.
