Definition ∞ ETH scarcity describes the reduction in the net supply growth of Ethereum’s native asset, Ether, often leading to periods of deflationary supply. This phenomenon is primarily driven by the EIP-1559 upgrade, which introduced a burning mechanism for a portion of transaction fees, and the transition to Proof-of-Stake, which reduced new ETH issuance. As more ETH is burned than issued, the circulating supply diminishes. This supply constraint influences its market value.
Context ∞ The concept of ETH scarcity is a prominent discussion point in Ethereum news, particularly since the Merge event and the implementation of EIP-1559. Analysts frequently monitor the net issuance rate to determine if Ethereum is experiencing deflationary periods, which can be a significant price driver. The long-term impact of ETH scarcity on its role as a store of value and its economic model continues to be a subject of considerable interest and analysis.
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