Why Ethereum's supply dynamics are so important

Why Ethereum's supply dynamics are so important

The DeFi, NFT sales, and meme coin trading in Ethereum are all affecting supply dynamics, leading to a constant uptick in supply dynamics.

On a seven-day model, Ethereum becomes more scarce than on a yearly framework, and on a yearly framework, it issues more than it burns.

What's going on with the supply of the network, why is transaction fees prices decreasing, and how does it look like for the future of Ethereum?

In August 2021, Ethereum implemented EIP-1559, a fee-burning mechanism, in place of EIP-1559. Since then, the supply has had a direct connection to gas prices. Higher gas prices mean more ETH getting burned and vice versa.

But it has been tested by a lesser transactional volume and dwindling gas prices.

The transaction fee for sending ETH across the protocol is around $0.28. A trade on Uniswap currently costs $2.76, a far cry from its $4.17 price in early September and a level not seen since the collapse of FTX in late 2022.

Chris Martin, the head of research at Amberdata, told Decrypt that the reasons behind declining gas prices are three-fold.

He added: lower fees can bring more users and activity on-chain, but more users ultimately lead to more congestion.