Ethereum, the second-largest cryptocurrency ecosystem, is facing a wave of criticism as its issuance turns positive, reversing the deflationary trend expected after The Merge. According to Ultrasound Money, the network has added nearly 20,000 ETH to its circulating supply since transitioning from proof-of-work to proof-of-stake in September 2022.
Root Cause: L2 Rollup Strategy Under Fire
Nikita Zhavoronkov, lead developer at Blockchair, attributes this inflationary shift to Ethereum’s pivot from an L1-focused scaling roadmap to a rollup-centric strategy. “All that Merge hype about Ethereum’s deflation is now fully undone: the L2 roadmap has basically torpedoed the burn mechanism,” he stated on social media. L2 structures like Arbitrum and Optimism handle most transactions off the main chain at low fees, bypassing EIP-1559’s fee-burning mechanism that was designed to reduce supply.
Industry Heavyweights Join the Criticism
Andre Cronje, co-founder of Sonic, also slammed L2s, claiming they are the reason Ethereum is inflationary again. “They can get the Sonic tech for free. 0 charge. Will 1000x their throughput. Make Ethereum Great Again!” Cronje promoted Sonic’s alternative scaling tech as a solution. Despite such calls, L2s have become deeply entrenched, securing over $37 billion in total value locked (TVL), with Arbitrum alone holding more than $14 billion per L2beat.
Market and Community Outlook
The inflationary trend has dampened market sentiment amid ETH’s poor price performance. Analysts warn that the “L2 prosperity, L1 recession” dynamic could undermine Ethereum’s long-term value proposition as a store of value. While the Ethereum Foundation has not officially commented, pressure is mounting on developers to reconcile the booming L2 ecosystem with the need for a vibrant base layer.