# The Decrease in Ethereum Supply since the Merge Update
Cryptocurrency enthusiasts are familiar with Ethereum, one of the popular forms of digital currencies. This article will discuss how Ethereum’s supply has reduced since the Merge update and the reasons behind the decline.
## What is the Ethereum Merge Update?
The Merge update was an important milestone in the evolution of the Ethereum network. It involved transitioning from a proof-of-work system to a proof-of-stake system. The proof-of-work system, which required miners to solve complex mathematical puzzles to validate transactions and earn rewards, was seen as energy-intensive and unsustainable in the long run. The proof-of-stake system, on the other hand, requires validators to hold a significant amount of Ethereum to validate transactions and earn rewards. This system reduces the amount of energy required to validate transactions, making it more environmentally friendly.
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### How Can the ETH Supply Reduce?
After the Merge update, the burning of transaction fees increased, resulting in the destruction of more Ether tokens. Additionally, the transition to proof-of-stake means that the issuance of new Ether tokens as rewards for miners has stopped. As a result, the supply of Ether tokens has been diminishing, since the validators in the proof-of-stake system are only rewarded for their work. Although validators receive approximately 500,000 new Ether tokens each year, about 1.6 million tokens are burned, resulting in more tokens disappearing than appearing. This means that Ether is deflationary, and its supply will continue to decrease, making it scarcer.
One interesting fact is that if the transition to proof-of-stake had never occurred, Ether’s supply would have increased by 2.5 million tokens since the Merge update.
## Why Has the Demand for Ethereum Increased Recently?
The demand for Ethereum has been increasing recently, leading to more usage of the network and, in turn, more Ether being burnt. There has been a surge in Ethereum’s value, making it more attractive to investors. This has led to an increase in the number of transactions on the Ethereum network, resulting in more transaction fees being burnt.
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### Increase in Ethereum Activity
Since the Merge update in September 2021, the Ether supply has reduced by about 100,000 tokens. However, the reduction in supply has been more significant in the last few months. At the beginning of the year, the Ether supply was in free-fall, with more tokens being burnt due to increased usage of the Ethereum network.
As of now, Ethereum’s supply is reducing at a rate of 0.15% annually, the highest point since the Merge update. The surge in demand for Ethereum has made it a scarce digital currency, with the supply of Ether tokens set to continue decreasing.
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## Conclusion
The Ethereum Merge update has seen the transition from a proof-of-work system to a proof-of-stake system, resulting in a decrease in the supply of Ether tokens. The burning of transaction fees, which has been going on since the London upgrade in 2021, has also contributed to the decrease in supply. The increased usage of Ethereum in recent months has further reduced the supply of Ether tokens. Ethereum’s status as a deflationary digital currency means that its supply will continue to decrease, making it a more valuable asset in the long run.