Ethereum Lost Deflationary Character After Dencun

Ethereum (ETH) has lost its deflationary nature following the deployment of the Dencun update on the network, which could have serious long-term consequences. This was reported by The Block with reference to a report from CryptoQuant experts.

Let us remind you that the Dencun update took place in mid-March 2024.

The report highlights that after this upgrade, fees were significantly reduced at both the second and first levels.

If before Dencun, at the beginning of March 2024, the average commission on the Ethereum network ranged from $16 to $30, then after it the figure dropped to a level of $6-$11.

At the time of writing, the value has dropped to $2, according to BitInfoCharts:

At the same time, in 2021, the London hard fork took place on the Ethereum network. Among other things, he laid down a mechanism for burning part of the commissions in order to make the asset deflationary.

The reduction in fees led to the fact that the daily volume of Ethereum liquidated decreased. This made the coin inflationary, CryptoQuant experts emphasized.

This is confirmed by Etherscan data. We previously wrote that the daily volume of Ethereum burned set a new minimum of 610.52 ETH. But then the indicator updated it.

At the time of writing, it has dropped to 547 ETH:

“Before the Dencun update, higher network activity on the Ethereum network meant higher fees burned. This, in turn, led to a reduction in supply. However, after the Dencun update, the total amount of commissions burned was no longer associated with network activity,” the report emphasizes.

Experts concluded that a return to a deflationary pattern would require higher network activity. Otherwise, the asset will permanently lose this status.