Months before Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS), simulations of The Merge predicted a sharp decline in the network's issuance rate. Now, real-world statistics confirm those predictions: since the Paris Upgrade triggered The Merge on September 15, 2022, Ethereum's issuance rate has slowed dramatically.
Issuance Rate Declines by More Than 94% Post-Merge
Ethereum has been deflationary since the August 2021 London Upgrade introduced EIP-1559, which reworked the base fee mechanism to burn a portion of transaction fees. The upgrade has destroyed 2,627,061 ETH (worth $8.56 billion) to date. However, The Merge amplified this deflationary effect by fundamentally altering the protocol's issuance schedule.
Data from ultrasound.money shows that only 3,076 ETH have been issued since The Merge. In contrast, under the previous PoW system, approximately 53,694 ETH would have been mined in the same period. This represents a 94% reduction in issuance rate. Proponents view this steep decline as a critical step toward making ETH scarcer over time, reinforcing its value proposition as 'ultra sound money.'
4.6 Million Fewer ETH by Next Year: Combined Effect of EIP-1559 and PoS
Current post-Merge statistics indicate an annual burn rate of approximately 297,000 ETH at existing activity levels, while the annual issuance rate has dropped from 3.78% to just 0.22%-0.25%. Under PoW, miners would have produced roughly 4,931,000 ETH per year; under PoS, annual new issuance has fallen to about 603,000 ETH.
As of writing, Ethereum's circulating supply stands at 120,583,249 ETH, with a market capitalization of $158.57 billion. If The Merge had not occurred, the total supply by September 19, 2023 would have been approximately 125,514,249 ETH (excluding EIP-1559 burns). With the current burn rate and PoS issuance rules, the estimated supply on that date will be around 120,889,249 ETH — a reduction of roughly 4,625,000 ETH compared to the PoW counterfactual.
Similar to Bitcoin's halving events, these structural changes make ETH increasingly scarce. The Ethereum community has embraced the term 'ultra sound money' to describe an asset that is not only deflationary but also more environmentally friendly and secure under PoS. The combination of EIP-1559's base fee burn and PoS's low issuance creates a powerful deflationary pressure that advocates believe will drive long-term value appreciation.
Implications for the Broader Crypto Ecosystem
The Merge's successful transition and the subsequent issuance rate collapse have drawn attention from institutional investors and economists. Some analysts argue that if demand for ETH remains constant or grows — driven by DeFi, NFTs, and Layer 2 adoption — the shrinking supply could lead to sustained price increases. However, critics caution that deflation alone does not guarantee value, and network utility must continue expanding.
Ethereum's shift to 'ultra sound money' also contrasts sharply with fiat currencies and even Bitcoin, which remains inflationary until its final halving. While Bitcoin's issuance halves every four years, Ethereum now has a net negative issuance under certain network activity conditions — meaning more ETH is burned than created, making it potentially harder than Bitcoin in terms of supply scarcity.
What do you think about Ethereum's issuance rate change following The Merge and EIP-1559? Do you believe 'ultra sound money' is a realistic label, or are there risks ahead? Share your thoughts in the comments below.