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Ether Becomes Deflationary for First Time Since the Merge: Coinbase

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Ether becomes deflationary for the first time since the Ethereum blockchain's software upgrade dubbed the "Merge." (SB7/Shutterstock)

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Ether (ETH) reached a “post-Merge milestone” this week as it became deflationary for the first time since the Ethereum blockchain switched to proof-of-stake (PoS), crypto exchange Coinbase (COIN) said in a report Thursday.

It became deflationary as more ether was burned verifying transactions than was created in the same period, which led to a reduction of 0.13% in supply over the last week, equivalent to about 4,000 tokens, the note said.

The rate of new ether creation has fallen by nearly 90% since the Merge, the note added.

CoinDesk Special Coverage: The Ethereum Merge

The Merge was the first of five upgrades planned for the Ethereum blockchain and involved the transition to a more energy-efficient PoS consensus mechanism.

Some argued that a drop in the supply of ether should have resulted in higher prices (assuming demand stays constant), but Coinbase noted that the price of the cryptocurrency has fallen about 4% in the last week.

An Ethereum-based token project called XEN triggered ether’s deflationary burn rate when it fueled a large spike in network traffic last weekend, the report said.

Read more: Morgan Stanley Says Crypto Ecosystem Is Becoming Less Decentralized

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