Image Credit: DappCon
Key Takeaways
- Ethereum’s “ultrasound money” narrative has stalled: ETH supply has grown since the Merge, with annualized issuance now running at approximately 0.83% due to low mainnet burn activity following the Dencun upgrade.
- More than 30% of all ETH is locked in staking contracts, concentrating issuance benefits among large validators and liquid staking providers while ordinary holders absorb dilution.
- DappCon 2026 in Berlin is hosting a Minimum Viable Issuance session examining whether current reward levels are still necessary for security, alongside discussion of the Fusaka upgrade’s EIP-7918 as a partial fix.
Ethereum’s circulating ETH supply has grown since the Merge, reversing the deflationary trend that briefly defined the network’s “ultrasound money” narrative, and a session on Minimum Viable Issuance at DappCon 2026 in Berlin this week is expected to put the protocol’s current issuance levels under scrutiny. The question of how much new ETH the protocol should be creating has grown more contested since 2022, and the data supporting any answer has become more complicated.
The “Ultrasound Money” Thesis and What Happened to It
For a brief period after the Merge, Ethereum appeared to be achieving something notable. The transition to proof-of-stake had cut new ETH issuance by around 88%, and EIP-1559, which burns a portion of every transaction’s base fee, was destroying ETH faster than the network was creating it.
Ethereum’s circulating supply was actually shrinking. Supporters called it “ultrasound money,” a reference to Bitcoin’s “sound money” narrative, with proponents arguing that a deflationary asset would be more attractive to long-term holders.
Then the Dencun upgrade arrived in March 2024, and the trend reversed. Dencun cut Layer-2 transaction costs by 90 to 98%, diverting significant Ethereum traffic off the mainnet and onto cheaper networks built on top of it. Less mainnet congestion meant less ETH being burned. The burn mechanism proved only as effective as the on-chain activity feeding it.
Three and a half years after the Merge, ETH supply has not continued declining. According to data from ultrasound.money, Ethereum’s circulating supply stood at approximately 121.5 million tokens as of March 2026, up from roughly 120.52 million at the time of the Merge in September 2022, according to ethereum.org.
Where Ethereum’s Supply Stands Today
Over the seven days ending mid-June, the network issued 94,525 ETH in staking rewards while burning only 324 ETH, adding a net 94,200 ETH to the total supply. That puts annualized supply growth at approximately 0.83%, making ETH mildly inflationary in the current low-activity environment.
Ethereum’s defenders note that the headline inflation figure omits important context. Under proof-of-work, estimates suggest Ethereum’s supply would be expanding at roughly 4% annually today. As of April 2026, approximately 36 to 37 million ETH, more than 30% of total supply, is locked in staking contracts, meaning the liquid float available on exchanges is considerably smaller than the circulating supply number suggests.
Staking APR currently averages 2.78% across roughly 897,000 active validators, a compression from the 4%-plus yields seen in 2023, according to KuCoin data. That yield compression is a direct consequence of the protocol’s issuance mechanics: as more ETH is staked, rewards are spread across a larger validator set, and each individual validator earns less.
What Minimum Viable Issuance Actually Means
The MVI principle has been part of Ethereum’s design philosophy since the proof-of-work era. The idea is that the protocol should issue only as much new ETH as is strictly necessary to keep the network secure. Issuing more than that functions as an inflation tax on all ETH holders, including those who do not stake, effectively penalizing non-participation.
The debate has grown sharper as staking has scaled. With more than 30% of all ETH now locked in validators, the argument that current issuance levels are necessary for security has drawn increasing scrutiny.
Critics point out that large liquid staking providers and centralized exchanges that operate validators benefit directly from elevated issuance, while ordinary holders who do not stake absorb the dilution. The MVI session at DappCon is expected to cover the current state of that debate and the timeline for any protocol changes.
Fusaka and the Attempt to Rebalance
Ethereum’s Fusaka upgrade, which activated on December 3, 2025, represented the most direct attempt so far to address the burn rate problem. EIP-7918, introduced in the Fusaka upgrade, established a minimum price for blob transactions, ensuring a base level of fees is burned even during low L1 activity. The measure was designed to prevent the burn rate from collapsing to near-zero during quiet periods on the base layer, which had been the key driver of net inflation since Dencun.
Whether EIP-7918 delivers measurable results depends on whether mainnet L1 activity grows enough to push base fees consistently above the deflation threshold, according to analysts cited by Bitget News and Fidelity Digital Assets. As of mid-2026, results remain to be seen.
US Spot ETH ETFs Shift to Staking Yields, Adding Validator Pressure
US spot Ethereum ETFs began distributing staking yields in early 2026, directing ETF assets into active validator deposits. That institutional flow into staking adds pressure to the same issuance dynamics under discussion at DappCon: more validators means more ETH being issued and more dilution for non-stakers.
For Ethereum’s developer community, the question is whether the protocol can adjust its issuance curve in a way that reduces dilution for non-stakers without reducing validator incentives below the level required for network security. The 7th edition of DappCon runs June 16 to 17 at the Radialsystem in Berlin, hosted by Gnosis under the theme “Own It: Fork the Future.”
