Cointime

Cointime

Download App
iOS & Android

Why Is Ethereum Turning Deflationary?

Validated Individual Expert

Why do goldbugs bet on gold when compared to other asset classes? The basic reason is the process associated with mining which makes it extremely less inflationary when compared to other asset classes. Hence gold’s price fluctuates paradoxically time and again. But gold does face some challenges like it could be easily confiscated and one has to find it difficult to move from one location to another.

There’s another nobel asset that mimics gold but with an upside, it can be easily moved. We are talking about Bitcoin. It has the same characteristics but mining process of Bitcoin involves using ASICS, which means a lot of investment comes into play.

What if there’s something which equals Bitcoin having deflationary traits and it is poised to host the next big financial infrastructure. Wouldn’t that be satisfying from an investment standpoint?

Ethereum, the programmable money is turning deflationary after The Merge and it is going to impact how people invest and use Ethereum in the near future.

Why is Ethereum Turning Deflationary?

In August 2021, EIP 1559 was rolled out which resulted in burning a part of the transaction fees awarded to the miners. Due to this upgrade, after the current locking of the tokens due to The Merge event, the amount of ETH in circulation has been lesser than the actual demand for ETH. As a result, ETH is turning deflationary for the first time. 2.8 million ETHs have been burned so far which has amounted to $4.6 billion.

Since ETH and Bitcoin will be neck to neck in terms of generating real-time value and cost of mining ETH is far lesser than Bitcoin, it might push a lot of miners to invest in turning validators and getting ETH as rewards when compared to Bitcoin.

Will It Be Good for investment?

From the perspective of an investor, it is going to be a good thing since ETH will replicate what Bitcoin has done so far but with additional trade-offs. For example, Bitcoin has turned into an inflation hedge. With ETH’s shrunk supply and high demand, ETH could maintain the same momentum like Bitcoin and future anticipated DeFi,NFTs and Metaverse development on top of Ethereum would further push demand for ETH, undoubtedly establishing the narrative of “ETH to the Moon.” However we have to wait and watch how things start to shape up when all the locked ETHs will come into circulation post the Shanghai Event slated for March 2023.

Ethereum Ethereum $1,925.44
-0.49%
Ethereum Cryptocurrency
Comments

All Comments

Recommended for you

  • Russian Foreign Minister Lavrov: Meeting with U.S. Secretary of State Rubio Scheduled for Tomorrow

    On July 22, Russian Foreign Minister Lavrov stated that the meeting with U.S. Secretary of State Rubio has been scheduled for tomorrow.

  • Supermicro Surges Over 14% Pre-Market as Q4 Gross Margin Doubles Guidance, New Orders Exceed $60 Billion

    On July 22, AI server manufacturer Supermicro (SMCI.US) surged over 14% in pre-market trading to $29.17. On the news, the company released preliminary results for the fourth fiscal quarter ended June 30. The company's GAAP and non-GAAP gross margins are expected to be between 15% and 17%, nearly double the previously guided range of 8.2% to 8.4%. Management attributed this better-than-expected performance to favorable customer structure and product mix. Meanwhile, the company's total new orders for the quarter exceeded $60 billion, a record high.

  • US Optical Communication Stocks Fall in Pre-market, Marvell Down Over 2%

    On July 22, US optical communication concept stocks fell collectively in pre-market trading, with Astera Labs, Coherent, Credo Technology, Ciena, AXT Inc, and MaxLinear falling more than 3%, and Fabrinet, Lumentum, Corning, Applied Optoelectronics, Tower Semiconductor, Marvell Technology, POET Technologies, and GlobalFoundries falling more than 2%.

  • US AI chip stocks fall pre-market, Intel down 3%

    On July 22, US stock market AI chip stocks generally fell before the market open, with Intel down 3%, TSMC, AMD, and Qualcomm down over 2%, Broadcom down nearly 2%, and NXP and Nvidia down over 2%.

  • Russia Develops 150nm Lithography Machine, Performance Comparable to Pentium 4 from 20 Years Ago

    On July 22, according to Fast Technology, Russia's Green City Nanotechnology Center (ZNTC) has successfully developed a prototype of an electron beam lithography machine (ELL) with a design standard of 150nm. The project is a key research and development task under the framework of Russia's national plan for scientific and technological development, codenamed Progress ELL 150. This device is mainly used for manufacturing photomasks, and can also directly draw circuit patterns on substrates without using masks. The 150nm process roughly corresponds to the performance level of Intel's Pentium 4 from 20 years ago. In 2025, ZNTC demonstrated a similar device with 350nm resolution, and has now advanced to 90nm and 130nm technology nodes. Industry experts point out that such equipment is only suitable for small batch production of specialized chips in fields such as aerospace and defense.

  • Beijing State-owned Capital: Nearly 10 Billion Yuan Allocated to Stock Market from Own Funds

    On July 22, Beijing State-owned Capital Operation and Management Co., Ltd. announced that, as of now, it has allocated nearly 10 billion yuan from its own funds to invest in the stock market. Going forward, the company will continue to support listed company stocks using its own funds and through its subsidiaries, including securities firms and public funds, while also backing the development of the Beijing Stock Exchange. Rooted in its functional role as a state-owned capital operator, the firm is committed to safeguarding the strategic value of core assets of listed companies and contributing to the stable and healthy growth of the capital market through concrete actions, as a state-owned enterprise based in Beijing. (Beijing State-owned Capital)

  • U.S. Stock Futures Fall, Major Indices Decline

    U.S. stock futures are lower, with Nasdaq 100 futures down 1%, S&P 500 futures down 0.4%, and Dow futures down 0.3%.

  • Japan's Two-Year Government Bond Yield Rises to 1.47%, First Time Since 1995

    Japan's two-year government bond yield rose to 1.47%, the first time since 1995.

  • WTI and Brent Crude Surge Over 4%

    On July 22, international oil prices surged rapidly. WTI crude oil futures rose over 4% to $87.77 per barrel; Brent crude oil futures rose over 4% to $94.71 per barrel.

  • Bank of Japan Reportedly Willing to Raise Rates Faster Than Once Every Six Months

    On July 22, the Bank of Japan is reportedly willing to raise interest rates at a pace faster than once every six months.

Daily Must-Read

Popular Activities

RaveDAO at Terra Solis by Tomorrowland: A Female-Led Techno Night Where Web3 Culture Converges

RaveDAO at Terra Solis by Tomorrowland: A Female-Led Techno Night Where Web3 Culture Converges

April 30 - April 30
Dubai

Popular Tags

Cointime
News
Contents
RSS
Company