The price of Ether (ETH), the cryptocurrency of the decentralized blockchain Ethereum, does not stop rising after its last update “London Hard Fork”, a major change in the way users pay for transactions.
Due to the update, users pay a base rate in addition to a tip (that goes to the miners) so that the transaction is added to a block and lead to the sale of Ether.
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In addition, they began to burn cryptocurrencies to keep the price stable and this “burning” is what determines the aforementioned base rate.
At the beginning of August, more than 4,418 ETH was burned, or about US $ 12.1 million, after the network was updated with “the new Ethereum improvement proposal”.
Ether is around $ 3,944.84, according to data from CoinMarketCap.
This new update, according to experts, could cause the currency to become a deflationary digital asset, that is, to generate an excess supply and decrease its price considerably.
The reasons below.
Why could Ether go into a deflationary spiral?
The new Ethereum update “burns” part of the profit that miners obtain, in charge of giving rise to real-time cryptocurrency trading transactions.
Today, miners participating in Ethereum’s smart contract network receive a newly issued ETH, which is where the current crypto inflation rate comes from, which was hovering around 4% in August.
Currently, the amount of ETH burned is greater than the reward the miners receiveThis is another factor that leads investors to think that it may end up being a deflationary cryptocurrency.
But it is not the only reason: Ethereum developers plan to eliminate cryptocurrency mining for good and replace it with the same investors who put their Ether “on the line.”
The holders of Ether will be in charge of verifying and confirming transactions between people and therefore, the issuance rate will depend on how many people exchange the cryptocurrency. Therefore, the greater the number of coins in play, the greater the emission quantity.
In this line, Experts believe that when Ethereum is completely moved away from mining, Ether will become a deflationary cryptocurrency as an oversupply and a reduction in demand for the asset will be generated.
This theory is already being tested by cryptocurrency analysts and, recently, a post was released through the popular Reddit forum that proves it:
In the comments, Ether investors debated the topic and concluded that true cryptocurrency deflation will come true in 2022 and 2023.