Ethereum 's token supply reached its highest level since January 2023, echoing amounts seen before the platform's significant Merge update on September 15, 2022, the Block reported.

Data from ultrasound.money indicates that the current ether supply stands at 120,521,523 ETH, approximately 383 ETH more than the supply recorded on the day of the Merge upgrade. This development was highlighted by Justin Bram, co-founder and CEO at Astaria, on a social media platform.

Analysts from Presto Research, including Jaehyun Ha, have pointed to last year's Dencun upgrade as a contributing factor to the increase in ether's inflation. They suggest that Ethereum's characterization as "Ultrasound money," which implies a deflationary asset superior to bitcoin as a store of value, could be in jeopardy.

The Dencun upgrade introduced blob transactions to accommodate large data payloads, particularly for Layer 2 solutions, using a separate fee unit called 'blob gas.' According to Ha, this has led to a decrease in the proportion of transaction fees being burned, reducing the deflationary mechanism that was previously limiting Ethereum's net supply increase.

Following the Merge upgrade in 2022, Ethereum's supply initially trended downwards, reaching a low of approximately 120,064,500 ETH in April 2024. However, it began to climb steadily after the Dencun upgrade in March of the same year. Byoungjoon Kim from DeSpread Research also identified the Dencun upgrade as a significant factor in the increase of ether's supply. Kim noted the migration of users and liquidity to the Solana network amid a memecoin rally and the rise of numerous Layer 2 solutions post-Dencun.

Despite the increase in supply, network activity on Ethereum has not seen a decline. However, Ha warned that the core narrative of Ethereum as 'ultrasound money' could be under threat, especially with the upcoming Pectra upgrade. This upgrade, expected in the first half of the year, includes an EIP that could further increase blob target and maximum limit, potentially leading to greater inflation.

Kim from DeSpread Research also raised concerns that a continued rise in ether supply might adversely affect the network's security over time, as there is a direct correlation between the price of ether and the network's security under the Proof of Stake (PoS) mechanism.

In related news, Ethereum has agreed to increase the network's gas limit for the first time since 2021, from 30 million to 36 million gas units, enhancing scalability.

Meanwhile, the Ethereum Foundation is navigating a contentious debate over its leadership, with an informal vote suggesting a leadership change from current executive director Aya Miyaguchi to former Ethereum researcher Danny Ryan. Co-founder Vitalik Buterin has dismissed these calls, leading to the departure of several core developers, including Eric Conner.

Ether 's price has seen a slight increase of 1% in the past 24 hours, trading at $2,744, though it has fallen by 12% over the last seven days.

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