A Major Milestone: The Supply of Ethereum Network’s Ether (ETH) so Far in May Has Exceeded That of Bitcoin (BTC) For the First Time Ever
Ethereum, the blockchain behind the Ether cryptocurrency, has just recorded a major milestone as network activity has skyrocketed. While this increase was expected amid Ether’s new all-time highs, the scale of the network activity is unprecedented.
Due to a huge increase in daily transaction fees, which are paid in Ether, as well as the corresponding increase in blocks mined, Ethereum has now added $71.88 million worth of Ether so far in May. During the same time, only $66.39 million worth of Bitcoin supply was added, as per the tabulation by John Street Capital.
That's a lot of supply which makes this move higher even more impressive & EIP 1559 timing important. pic.twitter.com/Nq8xjz3Q13
— John Street Capital (@JohnStCapital) May 10, 2021
This surprising outcome also poses important implications for the planned induction of the Ethereum Improvement Proposal (EIP) 1559, slated to go live with the London fork in July. As we discussed in a previous post, currently miners on the Ethereum blockchain receive a specific amount of Ether in transaction fee whenever a transaction is added to the blockchain. The EIP 1559 proposal plans to automate the calculation of a base transaction fee on the basis of network activity. This base fee in Ether will then be destroyed, thereby reducing Ether’s rate of annual supply addition from the current 5 percent to merely 1 to 2 percent. Of course, Ethereum is also switching away from mining to staking, where instead of expending computational power to add new blocks, “miners” will only need to hold Ether in master nodes. The transaction processing rewards will then be distributed according to how much Ether a miner has staked, thereby dramatically reducing Ethereum’s energy footprint.
The fact that the supply addition on the Ethereum network is already outpacing that of Bitcoin proves the necessity of the EIP 1559 proposal in curtailing inflationary pressures and forging price stability, which is a crucial condition if Ether is to go mainstream. This mechanism will also pave the way for a gradual price appreciation in Ether. It is hardly surprising, therefore, that Wall Street continues to remain quite bullish on Ethereum’s prospects. As an illustration, FundStrat's Tom Lee has now pegged a $10,500 price target for Ether. In our post yesterday, we detailed how a $9,000 price target is not only achievable but also probable.
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