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Ethereum, the ultrasound money.
Ethereum is becoming deflationary: What does it mean for the cryptocurrency?
Deflationary is called a currency which supply of coins is decreasing over time. With this way, they value of that currency technically is growing. This is usually accomplished by limiting the rate at which new coins are created, or by burning coins that are no longer needed. The idea behind a deflationary model is that as the supply of coins decreases, their value should increase, making them more scarce and more valuable.
In the case of Ethereum, the shift towards deflationary economics is primarily being driven by the implementation of EIP-1559, which went live in August 2021. This update introduced a number of changes to the way that transactions are processed on the Ethereum network, including the introduction of a new fee structure that is designed to burn a portion of the fees paid by users. Over time, this should lead to a decrease in the overall supply of Ether, the cryptocurrency used on the Ethereum network and also the gas fees which is needed to process a transaction on the network will lower.
There are several potential benefits to Ethereum becoming deflationary. For one thing, it could help to increase the overall value of Ether, making it a more attractive investment for users and helping to drive adoption of the Ethereum network. Additionally, a deflationary model could help to stabilize the price of Ether over the long term, since there would be a finite supply of coins available. A few years ago, you need a lot of money to process a transaction, today this amount has been reduced significantly. This enables more people to join the network.
The shift towards deflationary economics has been well-received by the Ethereum community. In the weeks following the implementation of EIP-1559, there was a noticeable decrease in the supply of Ether, indicating that the burning of transaction fees is already having an impact on the network’s overall economic model.
The below is a today’s screenshot from https://ultrasound.money/ , 31,777.65 ETH has burned since the merge.
Looking to the future, it’s difficult to say exactly what the long-term impacts of a deflationary Ethereum will be. However, early indications suggest that the shift towards deflationary economics could help to solidify Ethereum’s position as a leading player in the world of cryptocurrency.
In my personal opinion, Ethereum along with Bitcoin will be the two main players in the cryptocurrency industry for a long time.
In conclusion, Ethereum’s move towards a deflationary economic model through EIP-1559 is an important development in the world of cryptocurrency. While there are potential downsides to this shift, the overall impact on the Ethereum network remains to be seen. It will be interesting to see how the Ethereum community responds to these changes over time and how they ultimately shape the future of the network.
What is your opinion? Feel free to write in the comments!
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