The supply of Ethereum (ETH) has been steadily increasing for 73 consecutive days, marking its longest inflationary period since the landmark Merge in 2022. This inflationary trend began in mid-April, coinciding with the aftermath of the Dencun upgrade, which significantly altered the dynamics of block space competition on the Ethereum mainnet. The upgrade aimed to optimize the network by reducing transaction costs and improving efficiency, but it also had the unintended consequence of increasing the overall supply of ETH.

The Dencun upgrade, implemented on March 13, introduced several key Ethereum Improvement Proposals (EIPs), each designed to enhance the network's performance and scalability. Among these, EIP-4844 stands out as particularly impactful. This EIP introduced the concept of "blobs," a mechanism that allows transaction data to be stored separately and temporarily, outside the main blockchain. By doing so, it effectively reduces the fees associated with storing block data on Ethereum layer-2 networks. However, this also led to a decrease in the overall amount of ETH being burned on the mainnet, contributing to the inflationary trend.

Since April 14, the supply of ETH has increased by over 112,000 coins, as reported by Ethereum's ultrasound.money dashboard. This steady rise in supply can be directly linked to the effects of the Dencun upgrade. While the upgrade has succeeded in lowering transaction costs on layer-2 networks such as Arbitrum and Optimism, it has inadvertently reduced the ETH burn rate on the mainnet. This reduction in the burn rate means that less ETH is being destroyed through transaction fees, leading to a gradual increase in the overall supply.

Despite the recent inflationary trend, Ethereum's total supply has still experienced a net decrease since the Merge in September 2022. The Merge, which marked Ethereum's transition to a proof-of-stake consensus mechanism, has led to significant changes in how ETH is issued and burned. Since the Merge, over 1.5 million ETH has been burned through transaction fees, compared to the 1.36 million ETH that has been issued. This results in a net reduction of 345,000 ETH, which is equivalent to just over $1.1 billion at current market prices. This overall reduction underscores the effectiveness of the proof-of-stake mechanism in controlling the supply of ETH.

Proto-danksharding, another major feature introduced by the Dencun upgrade, has also played a crucial role in shaping the current supply dynamics of Ethereum. This feature enhances data availability for block space on the Ethereum mainnet, allowing for more efficient processing of transactions. By improving the way data is stored and accessed, proto-danksharding has contributed to lower transaction costs on layer-2 networks. However, this efficiency has also impacted the inflationary trend by decreasing the amount of ETH that is burned, further contributing to the gradual increase in supply.

The recent inflationary period highlights the complex interplay between Ethereum's supply and demand, influenced by ongoing upgrades and network improvements. As the network continues to evolve, these changes underscore the delicate balance between enhancing functionality and managing the cryptocurrency's supply. The Ethereum community and developers will need to continue monitoring these dynamics to ensure that the network remains both efficient and sustainable in the long term. This ongoing balance is crucial for maintaining the value and utility of ETH as a leading cryptocurrency in the ever-evolving digital asset landscape.