The term “ultra-currency” has been thrown around quite a bit in the Ethereum (ETH) community, often describing the network’s potential to become a deflationary asset with better tokenomics than Bitcoin (BTC). Some supporters believe the story is well-founded, while others argue it is exaggerated and based on overly optimistic assumptions.
Is the Ethereum “ultrasonic currency” narrative overblown?
In a post posted on X by developer antiprosynesis.eth, Challenge The “ultrasonic currency” story, which they claim is often accompanied by jargon that can obscure the reality of Ethereum’s monetary policy. In particular, the analyst believes the narrative is a bit “excessive” and full of “pseudoscientific tricks” that could mislead the average user.
Adopting a neutral view of antiprosynesis.eth, Ethereum’s monetary policy is designed to be sustainable, most importantly without the dangerous pitfalls of hyperinflation or excessive deflation. The developer claims that balancing token emissions is important.
In the case of Ethereum, this is achieved by burning a portion of the gas fee. After EIP-1559 went live in 2021, the first smart contract platform changed its bidding system, creating a system where the network sets a base fee along with an allowance that allows users to “tip” validators. The base fee is burned, leaving the network deflationary or, as researchers claim, unsustainable.
In the case of Bitcoin, the network will continue to issue new coins to miners until all 21 million BTC have been distributed. It will be more than 10 years from now. To achieve this, the Bitcoin protocol halved the mining reward. In the early days of Bitcoin, miners received 50 BTC each time they confirmed a block of transactions. However, when the network is halved in April, miner rewards per block will decrease to 3.125 BTC.
On the road to sustainability, Ethereum issuance rate continues to decline
Comparing the two approaches, Ethereum developers note that each system has mechanisms to ensure that token economics are sustainable. The analyst added that the “ultrasonic money” narrative espoused by proponents may be exaggerated and, to some extent, an overly optimistic assessment of ETH’s deflationary capabilities.
As of January 10th, Ethereum has burned over 3.9 million ETH since the implementation of EIP-1559 based on Ultra Sound Money. data. During this period, the network issued more than 6.9 million.
This confirms that Ethereum has been burning more ETH recently. It maintains some degree of inflation, like Bitcoin. Nevertheless, unlike Bitcoin, Ethereum’s issuance rate is steadily decreasing due to increased token burns.
Featured image from Canva, chart from TradingView