Thread by @StackerSatoshi

Is #Ethereum deflationary yet?

I'm explaining critical concepts in a 🧵 <1/12>

Please *share*.

It's exciting and helps people understand what to expect from #ETH after the #EthereumMerge

Transition to PoS reduced energy usage by 95%.

Justin Drake claims it's 0.2% of the entire World's use. 🔥

But the main concern is that the network doesn't seem deflationary. Yet.

Why?

There are ✌🏻 reasons.

1. Amount of staked $Eth
2. Base (Gas) Fee

1. Amount of staked ETH

Let's see first the % of staked tokens for different blockchain networks.

1st column, the network
2nd APY
3rd the % of tokens being staked

Compared to other networks, ETH staking is unusual.

It's only 12% of the supply, while the average is 50% in top #Crypto

There is much space to grow.

$ETH is being created as a reward for staking now. Long story short:

MORE STAKING = MORE TOKENS

Rn, 14m staked = 1700eth/d
If we reach the av.
60m staked will create 3,5keth/d

So we might assume the supply will eventually GROW. But on the other hand, more staking means a more secure and stable network. 👀

It is essential to understand that before we move to the 2nd reason:

BASE GAS FEE

After the EIP-1559, part of the transaction fees is being burned.

🚨
More transactions -> higher fees -> more $ETH burn

RN (14m tokens being staked), the GAS FEE must stay above 15.1 GWEI to keep the $ETH deflationary.

BUT!

If more ETH is staked, the higher the GAS needs to be.

For now, it means that #Ethereum is NOT deflationary until enough transactions proceed.

The chances drop if more people start to stake $ETH. There is a high chance of that! Is there an even higher chance for more transactions than today? I would say so.

🔥🔥🔥
During POW, it was +15k tokens /day
Now: 1,7k (we aim for 3.5k).

It is a lot less!

Also, there is less selling pressure as the miners don't sell that much to pay for the maintenance.
🔥🔥🔥

Summarizing: Even if the $ETH is not deflationary, it is a great long-term play.

If more people are staking, the networks will turn more stable. But to make it deflationary, the network *needs* more transactions than today. 🥶

Do you think it will happen?

Thanks for your time! ✌🏻

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