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ETH supply expected to decline 2% a year, analysts say

Ether, which has a volume six times greater than Bitcoin, intends to adopt greater deflationary pressure.

Ethereum currency does not have a limit on its supply. However, according to study performed by Ultrasound Money, the ETH supply is expected to drop by 2% per year.

In early August, the “London” update included a proposal to increase the size per block (EIP-1559), which aims to reduce congestion in the network. The update, instead of sending transaction fees to the miners, chose to destroy them.

In this way, the Ethereum blockchain is destroying more tokens than it produces, generating strong annual deflationary pressure.

Falling production

So far, there has been a 57% reduction in the production of new Ether tokens, according to site Watch the Burn.

The move is understandable: Ethereum 2.0 is slated for release next year, and with the big update, the Proof-Of-Work (PoW) mining model will be phased out. Users will be able to mine only through Proof-Of-Stake (PoS).

Currently, the Ethereum beacon chain already works with PoS, but it is not possible to perform withdrawals or implement blockchain applications on it. Features will be released as soon as the next major update is installed.

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