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‘Ultra Sound Money’ — Post-Merge Stats Show Ethereum’s Issuance Rate Plunged After PoS Transition

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‘Ultra Sound Money’ — Post-Merge Stats Show Ethereum’s Issuance Rate Plunged After PoS Transition

Ultra Sound Money — Post-Merge Stats Shows Ethereum's Issuance Rate Plunged After PoS Transition

Months before Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS), a simulation of The Merge had shown the network’s issuance rate would drop following the ruleset change. Statistics now show that the simulation’s predictions have come to fruition as the network’s issuance rate has slowed significantly since September 15, following the Paris Upgrade that triggered The Merge.

Ethereum’s Issuance Rate Sinks Lower Post-Merge

Since August 5, 2021, Ethereum has changed from being inflationary to deflationary by introducing the ruleset upgrade ​​EIP-1559. Essentially, the change reconfigured the algorithm tied to the base fee per gas in the protocol, and since EIP-1559 was codified, the network now burns the base fee per gas. Since the August 5 London Upgrade, the network has destroyed 2,627,061 ether worth $8.56 billion. Since The Merge, however, Ethereum is a lot more deflationary because the change redefined the protocol’s issuance rate.

'Ultra Sound Money' — Post-Merge Stats Show Ethereum's Issuance Rate Plunged After PoS Transition
Supply growth and issuance statistics if Ethereum was still a PoW chain. Data via ultrasound.money.

For instance, metrics from the web portal ultrasound.money show 3,076 ETH has been issued since The Merge on September 15. If proof-of-work (PoW) miners were still mining ether, they would have produced 53,694 ether since the start of The Merge. The current data shows that Ethereum’s issuance rate post-Merge has dropped by more than 94% lower than if the blockchain would have remained a PoW network. ETH’s deflationary characteristics are believed to be beneficial, as they make ether scarce over time.

4.6 Million Fewer Ethereum by Next Year Thanks to EIP-1559 and Post-Merge Ruleset Changes

Currently, post-Merge data indicates that 297,000 ETH will be burned annually at current rates and issuance has dropped from 3.78% per annum to 0.22% to 0.25% per year. Before The Merge, miners would have produced 4,931,000 ether per year but since the protocol changed to PoS, yearly issuance has slid to 603,000 new ether per year.

'Ultra Sound Money' — Post-Merge Stats Show Ethereum's Issuance Rate Plunged After PoS Transition
Post-Merge statistics show issuance has dropped considerably since the transition. Data via ultrasound.money.

At the time of writing, ETH has a circulating supply of 120,583,249 ether and at current exchange rates the aggregate is worth $158.57 billion in USD value.

'Ultra Sound Money' — Post-Merge Stats Show Ethereum's Issuance Rate Plunged After PoS Transition
Ultrasound.money data shows ETH’s issuance if PoW remained, ETH’s current issuance, and BTC’s 1.72% inflation rate per annum.

This means if Ethereum never Merged, by September 19, 2023, the total supply would be around 125,514,249 without accounting for EIP-1559’s burn rate. With the burn rate and post-Merge rules, ETH’s total supply by September 19, 2023 should be an estimated 120,889,249, or 4,625,000 ether less than it would be under previous PoW consensus rules. Similar to Bitcoin’s halving characteristics, ETH supporters believe the aforementioned ruleset changes will make ether harder than traditional sound money, as proponents these days like to call it ‘ultra sound money.’

What do you think about Ethereum’s issuance rate change following The Merge and EIP-1559 being introduced last year? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Ultrasound.money stats.

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

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Grayscale Launches New Investment Product While Bitcoin Trust Crashes to 35%

Grayscale Investments is offering investors an opportunity to invest in Bitcoin mining hardware in the bear market.

The new investment opportunity, called the Grayscale Digital Infrastructure Opportunities LLC (GDIO), is now open to qualified individual and institutional investors, even as the asset manager allows ETF-related court proceedings to run their course.

Grayscale putting capital to work

Grayscale will use investor capital from the GDIO to buy mining hardware for a minimum of three years. It will use the hardware to mine and subsequently sell bitcoin. Mining is the energy-intensive process undertaken by a computer network to create a new transaction block and verify it. The node in the network that creates the block is known as a miner. A miner is rewarded in bitcoin for his effort, which typically requires large amounts of cheap electricity and computing power.

Part of the proceeds Grayscale will earn from its efforts will be paid out quarterly to GDIO investors.

“Grayscale’s unique position at the center of the crypto ecosystem enables us to create offerings that allow investors to put capital to work through differing market cycles,” stated Michael Sonnenshein, Grayscale’s chief executive.

GDIO represents another way the company has sought to provide investors with exposure to bitcoin without directly holding the asset.

Investors can also purchase shares from its GBTC trust and gain exposure to bitcoin through Grayscale’s legally regulated business in the U.S.

But Grayscale has a problem. Because investors cannot redeem shares in the trust for bitcoin, the price per share has dropped drastically, trading at a discount of 35% to its Net Asset Value. 

At the close of the trading day on Oct. 5, shares were trading at a shade over $12, despite being backed by $18.45 worth of bitcoin.

To mitigate this discount, Grayscale has pursued the conversion of GBTC into a spot bitcoin exchange-traded fund, which has so far been unsuccessful. The U.S. Securities and Exchange Commission denied the company’s latest application in June 2022, prompting Grayscale to pursue legal action against the federal agency. 

Nic Carter of Castle Island Ventures, a venture capital firm focused on early-stage public blockchain startups, said that Grayscale could wind down the ETF:

watching the GBTC discount. looks like ATL at -35%. on top of discounted spot BTC. paths to breaking open the piggy bank: SEC can approve ETF conversion, or Grayscale can wind down the trust themselves if they so choose.

— nic carter (@nic__carter) June 17, 2022

The SEC maintains that spot bitcoin ETFs are prone to underlying market manipulation.

Grayscale undeterred by SEC rejection

Despite consistent resistance from U.S. regulators, Grayscale launched its first European ETF in May 2022, which tracks the Bloomberg Grayscale Future of Finance Index, offering customers exposure to institutions at the crossroads of finance, technology, and cryptocurrencies.

Grayscale raised investors’ eyebrows recently when it announced that it had applied with the SEC to distribute 3 million ETHPoW tokens that were distributed to all Ethereum (ETH) holders after the controversial proof-of-work fork went live. 

At the time, Grayscale said it was seeking the rights to sell the tokens and pay out shareholders. 

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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