{"id":172628,"date":"2024-10-04T15:03:13","date_gmt":"2024-10-04T15:03:13","guid":{"rendered":"https:\/\/crypto-economy.com\/?p=172628"},"modified":"2024-10-04T15:03:17","modified_gmt":"2024-10-04T15:03:17","slug":"ethereums-ultrasound-money-myth-crushed-as-inflation-surges-to-2-year-high","status":"publish","type":"post","link":"https:\/\/crypto-economy.com\/ethereums-ultrasound-money-myth-crushed-as-inflation-surges-to-2-year-high\/","title":{"rendered":"Ethereum&#8217;s &#8216;Ultrasound Money&#8217; Myth Crushed as Inflation Surges to 2-Year High"},"content":{"rendered":"<p style=\"text-align: justify\">TL;DR<\/p>\n<ul>\n<li style=\"text-align: justify\">Ethereum&#8217;s <strong>inflation<\/strong> has reached<strong> 0.74%<\/strong>, the highest level in two years, raising doubts about its status as &#8220;<strong>ultrasound money<\/strong>.&#8221;<\/li>\n<li style=\"text-align: justify\">The adoption of layer 2 solutions like <strong>Arbitrum and Optimism<\/strong> has reduced gas fees, limiting the <strong>burning of ETH<\/strong> and affecting the total supply.<\/li>\n<li style=\"text-align: justify\">Vitalik Buterin supports a <strong>reduction of the minimum deposit for solo staking, from<\/strong> 32 ETH to a range of <strong>16 to 25 ETH<\/strong>, to encourage participation in the network.<br \/>\n<hr \/>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify\"><strong><a href=\"https:\/\/crypto-economy.com\/best-ethereum-wallets\/\" target=\"_blank\" rel=\"noopener\">Ethereum&#8217;s<\/a> inflation rate<\/strong> has reached its highest level in the<strong> last two years<\/strong>, standing at <strong>0.74%<\/strong>, according to a recent report from <a href=\"https:\/\/www.binance.com\/en\/research\/analysis\/monthly-market-insights-2024-10\" target=\"_blank\" rel=\"noopener\"><strong>Binance Research<\/strong><\/a>.<!--more--><\/p>\n<p style=\"text-align: justify\">This increase raises questions about Ethereum&#8217;s ability to <strong>maintain its status as &#8220;ultrasound money<\/strong>,&#8221; an idea that promotes ETH as a <strong>deflationary<\/strong> asset. The increase in the cryptocurrency&#8217;s supply has generated concern among analysts, who point out that <strong>the reduction in activity on the main network has limited the impact of ETH burning<\/strong>, a key mechanism for controlling its inflation.<\/p>\n<h3 style=\"text-align: justify\">Layer 2 Solutions and the Reduction of Gas Fees<\/h3>\n<p style=\"text-align: justify\">One of the most important factors behind this phenomenon is the growing adoption of <strong>layer 2 solutions<\/strong>, such as <strong><a href=\"https:\/\/crypto-economy.com\/arbitrum\/\" target=\"_blank\" rel=\"noopener\">Arbitrum<\/a> and Optimism<\/strong>. These networks allow transactions to be processed outside of Ethereum&#8217;s main blockchain, <strong>significantly reducing gas fees<\/strong>.<\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-172631\" src=\"https:\/\/crypto-economy.com\/\/wp-content\/uploads\/2024\/10\/eth-binance-post.jpg\" alt=\"ethereum post\" width=\"825\" height=\"600\" srcset=\"https:\/\/crypto-economy.com\/\/wp-content\/uploads\/2024\/10\/eth-binance-post.jpg 825w, https:\/\/crypto-economy.com\/\/wp-content\/uploads\/2024\/10\/eth-binance-post-300x218.jpg 300w, https:\/\/crypto-economy.com\/\/wp-content\/uploads\/2024\/10\/eth-binance-post-768x559.jpg 768w\" sizes=\"(max-width: 825px) 100vw, 825px\" \/><\/p>\n<p style=\"text-align: justify\">However, the decrease in fees also results in a <strong>lower amount of ETH burned<\/strong> through transactions, affecting the network&#8217;s ability to maintain a limited supply. <strong>Ethereum Improvement Proposal (EIP) 1559<\/strong>, introduced in 2021, implemented a mechanism <strong>to burn a portion of transaction fees<\/strong>, with the goal of keeping inflation under control, but the decline in network activity has made this mechanism <strong>less effective<\/strong> in recent months.<\/p>\n<h2 style=\"text-align: justify\">Ethereum Inflation Expected to Decrease<\/h2>\n<p style=\"text-align: justify\">Additionally, <strong>the increase in ETH issuance has outpaced the burn rates<\/strong>, resulting in a net increase in total supply. With this ongoing consolidation trend, the idea that ETH can continue to be a deflationary cryptocurrency in the near future is called into question, especially if current market conditions persist. Despite this, Binance pointed out that Ethereum&#8217;s inflation remains below 1% and <strong>does not view this change as necessarily negative<\/strong>. In fact, during periods of higher network activity, <strong>inflation is expected to decrease again<\/strong>.<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-full wp-image-78185\" src=\"https:\/\/crypto-economy.com\/es\/\/wp-content\/uploads\/sites\/4\/2024\/01\/ethereum-post-1.jpg\" alt=\"ethereum post\" width=\"825\" height=\"300\" \/><\/p>\n<h3 style=\"text-align: justify\">More Stakers for More Activity<\/h3>\n<p style=\"text-align: justify\">On the other hand, Ethereum co-founder <strong>Vitalik Buterin<\/strong> has expressed support for a proposal to reduce the amount of ETH required for users to participate in <strong>solo staking<\/strong>. Currently, validators must <strong>lock up 32 ETH<\/strong> to operate a node, but Buterin advocates for reducing this minimum to a <strong>range of 16 to 25 ETH<\/strong>, which could incentivize greater participation in the network and potentially <strong>counteract some of the current inflationary effect<\/strong> by increasing the amount of ETH locked in staking<\/p>\n","protected":false},"excerpt":{"rendered":"<p>TL;DR Ethereum&#8217;s inflation has reached 0.74%, the highest level in two years, raising doubts about its status as &#8220;ultrasound money.&#8221; The adoption of layer 2 solutions like Arbitrum and Optimism has reduced gas fees, limiting the burning of ETH and affecting the total supply. Vitalik Buterin supports a reduction of the minimum deposit for solo &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Ethereum&#8217;s &#8216;Ultrasound Money&#8217; Myth Crushed as Inflation Surges to 2-Year High\" class=\"read-more button\" href=\"https:\/\/crypto-economy.com\/ethereums-ultrasound-money-myth-crushed-as-inflation-surges-to-2-year-high\/#more-172628\" aria-label=\"More on Ethereum&#8217;s &#8216;Ultrasound Money&#8217; Myth Crushed as Inflation Surges to 2-Year High\">Read more<\/a><\/p>\n","protected":false},"author":34,"featured_media":172630,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[73,70,74],"tags":[5271,4620,4656,4679,5170,5469],"_links":{"self":[{"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/posts\/172628"}],"collection":[{"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/comments?post=172628"}],"version-history":[{"count":1,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/posts\/172628\/revisions"}],"predecessor-version":[{"id":172633,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/posts\/172628\/revisions\/172633"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/media\/172630"}],"wp:attachment":[{"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/media?parent=172628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/categories?post=172628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/crypto-economy.com\/wp-json\/wp\/v2\/tags?post=172628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}