Coinbase Global Inc (NASDAQ:COIN), one of the world’s largest Cryptocurrency exchanges, has stated that the inflation rate of Ethereum (CRYPTO:ETH) is irrelevant in the current context.
What happened
According to CriptoNoticias, the Coinbase report explains that although the inflation rate of ETH varies constantly, other factors play a crucial role in the cryptocurrency’s economy, mitigating the impact of this factor. One of these factors is the stakingwhere a large portion of the circulating ETH is locked in smart contracts for profit.
Since the launch of the network Beaconthe total amount of staked ETH has grown to 34 million, accounting for 28% of the total ETH supply, according to data from ultrasound.money. Although the staking rate is lower than on other networks such as Solarium (CRYPTO:SOL), remains a large net supply sink for ETH.
Since the Merge in 2022, ETH issuance per block was reduced, allowing burns of the cryptocurrency to exceed issuance during times of high network activity, making it deflationary. However, after the upgrade Dencun Last March, the issuance was greater than the destruction of ETH, increasing the circulation.
There are currently 120,309,070 ETH in circulation and 16,957 coins entering the supply weekly. Coinbase highlights that Ethereum inflation does not translate into selling pressure as is the case with miner revenue. Bitcoin (CRYPTO:BTC). The introduction of staking has changed this scenario, allowing stakers to take a long-term view and hold on to their assets.
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Why is it important?
Coinbase’s statement comes at a crucial time for Ethereum. The Dencun upgrade increased ETH issuance, raising concerns about the cryptocurrency’s inflation. However, staking has proven to be a significant stabilizing factor.
Since the Merge in 2022, Ethereum has seen a reduction in ETH issuance per block, allowing burns to outpace issuance during periods of high network activity.
Furthermore, the proliferation of networks like Solana has reduced activity on the Ethereum mainnet, contributing to its inflationary nature. Despite this, staking has absorbed a considerable amount of ETH, mitigating the effects of inflation.
In conclusion, Ethereum’s stability, despite fluctuations in its inflation rate, underlines the importance of factors such as staking in the cryptocurrency economy.
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