For the first time since the significant transition to a proof-of-stake consensus model during the Ethereum Merge in September 2022, the supply of Ether has become inflationary. This shift marks a notable change from its previous deflationary status, which had been maintained since the Merge. The change is attributed to the recent Dencun upgrade, which was implemented two months ago and has subsequently increased the total Ether supply from 120 million on March 12 to 120.1 million by May 7, according to data from CryptoQuant.

The Dencun upgrade, primarily aimed at reducing transaction fees, has led to a decrease in the amount of Ether burned—a mechanism introduced during the Merge that involved permanently removing a portion of transaction fees from circulation. This burning process was pivotal in maintaining Ether's deflationary status by reducing the overall supply. However, with the Dencun upgrade making median transaction fees up to four times cheaper, there has been a significant reduction in the amount of Ether being burned, thus contributing to the inflationary trend.

Ki Young Ju, founder and CEO of CryptoQuant, commented on this development, emphasizing that the primary strength of Ethereum lies in its decentralized applications (DApps) rather than its comparison to Bitcoin as "sound money." He noted on X (formerly Twitter) that Ethereum's shift from being "ultrasound money" should not be viewed critically since the network's benefits are more aligned with its capabilities in supporting DApps.

This inflationary turn could challenge the narrative of Ethereum as "ultra sound" money—a term that had been used to describe its enhanced scarcity post-Merge. According to a report by CryptoQuant, this new phase of reduced transaction fees and lowered burning rates might end the portrayal of Ether as a deflationary asset.

The increase in Ethereum's total supply, albeit slight, reflects a broader implication for the Ethereum network and its community. While lower transaction fees benefit users by reducing the cost of network activities, the decreased rate of Ether burned might impact the long-term economic attributes of the cryptocurrency.

As Ethereum continues to evolve with new upgrades and enhancements, the community and investors will likely keep a close watch on how these changes affect the network's foundational economics and its position in the broader cryptocurrency market.