Key Points:
One of the predictions said that Ethereum would grow strongly in the next year. Specifically, ETH will be deflationary in 2023. The total circulating supply will decrease by at least 1%. On the other hand, after the Shanghai Upgrade, it will be possible to withdraw the staked ETH, from which it is possible to increase the amount of ETH staked by at least 50%.
Last September, the Ethereum blockchain switched its consensus mechanism from proof of work to proof of stake. As of January 5, 2023, $21 billion in ETH has been staked on the network, or about 14% of the total supply.
Currently, that ETH cannot be “deposited”. The transition to proof-of-stake is complex, and one way the Ethereum network controls risk is by not allowing users to withdraw their staked ETH.
However, around 2023, the Ethereum blockchain will go through a phase known as the “Shanghai Upgrade” that will allow the withdrawal of staked ETH. This will give investors who can’t stand an indefinite lockout an incentive to participate.
Therefore, in 2023, expect the total amount of ETH staked to increase by at least 50% by the end of the year.
Ethereum’s transition from proof-of-work to proof-of-stake in September of last year significantly reduced the new ETH the blockchain released simply because proof-of-stake is more efficient than proof-of-work.
When you combine this lower issuance with the fact that ETH is burned as people access the network, you create a situation where the net supply of ETH could decrease.
Before the move to proof of stake, the circulating supply of ETH was growing at an annual rate of about 2.5%. But since making the switch, net issuance has remained virtually unchanged, with collection only increasing at a rate of 0.011% per year.
So Bitwise predicts that there will be significantly more demand for accessing and using Ethereum applications in 2023 than in 2022, increasing the amount of ETH burned through transactions. As a result, the total amount of ETH in circulation will decrease by 1%, causing a significant impact on investors.
The Merge is a breakthrough in the development journey of the Ethereum ecosystem. The improvements in Sharding technology will also help the Ethereum chain to require fewer resources, be faster, and be easy to scale but still possible to share while keeping the security. It is also the premise for the solid future development of Ethereum.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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