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Ethereum’s ecosystem facilitates the development of decentralized applications (DApps). Its native currency Ether is used for transactions and as a reward for validators who process transactions. There is no fixed limit on the total supply of ETH, but the rate of new coin creation is designed to decrease over time.

Pre-Merge, the annual issuance rate of ETH used to be approximately 5%, which meant that the circulating supply of ETH increased by that amount each year. However, the move to PoS resulted in the diminished issuance of ETH via rewards to validators, arguably resulting in ETH becoming a deflationary asset. Importantly, as the Ethereum ecosystem now uses PoS, the validators must stake their ETH as collateral. As more ETH is locked up in the network, the supply of ETH available for trading decreases, which could lead to an increase in its price over time.

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