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Ethereum’s inflation rate is now lower than that of the most valuable cryptocurrency, Bitcoin.
Famous crypto proponent and influencer, Lark Davis, tweeted this development to his over 700k followers on Twitter following his vlog update concerning the news on YouTube.
According to stats from on-chain analytics firm, Glassnode, Ethereum has fielded inflation rates that underscore Bitcoin’s inflation rates for the last 3 months.
This is a new milestone for the Ethereum token as it continues to track Bitcoin’s success in the industry.
The advent of Ethereum’s low inflation-borderline deflation has stirred up the ETH hard money discussion once again in the industry.
Ethereum’s Hard Money Controversy
Hard Money in finance essentially means a currency, fiat or not, that is backed by valuable physical exchangeable commodities like silver and gold. The concept of hard money relative to crypto leverages the concept of stablecoins that are backed by fiat currencies to ensure stability effectively merging the traditional finance sector and the crypto DeFi sector on a fundamental level.
In the crypto industry globally, Ethereum features the highest relevance through its robust blockchain network adaptability and the industry-wide utility of its crypto token in different forms. The increasing relevance has led to deflationary concerns which brought up the debate of its utility as hard money.
The debate about whether Ethereum can grow to effectively sub as hard money all by itself raised a lot of questions that answers couldn’t be answered due to the inherent constraints of the crypto technology in itself. The hard money debate was inconclusive with highlights that only listed the digital asset’s shortcomings concerning its adoption as hard money.
However, crypto whale and founder of a Bitcoin investment platform cited Glassnode’s chart that showed the circulation supply of Ether and Bitcoin arguing that the crypto is now a competitor in the hard money relevance race.
He further argued his position when he said that hard money does not constitute only the supply of low inflation rates but also the immutability of the featured inflation, citing the case crude oil as the commodity isn’t a hard money despite OPEC’s featured low inflation rates. OPEC is the Organization of Petroleum Exporting Countries that oversee and regulate the price of crude oil globally.
Ethereum’s Deflationary Drive
Ethereum’s record low inflation rates and borderline deflationary regime comes after the integration of the EIP 1559 protocol on the Ethereum blockchain.
The Ethereum Improvement Proposal (EIP) 1559 upgrade burns Ether tokens per transaction on the blockchain by burning the gas fees that were formerly used to incentivize miners in the industry.
The gradual loss of Ethereum overtime against is set to eclipse supply by the network, effectively reducing the total ETHs in circulation.
The overall supply reduction and increasing demand have set Ethereum down the oath of deflation and the crypto is now backed to become the world’s first deflationary cryptocurrency.