Ethereum (EH): Inflation and Staking under Discussion

Ethereum founder Vitalik Buterin has presented ideas for the further development of ETH, taking a closer look at the topic of staking. Other experts discuss whether inflation will become a permanent feature on Ethereum again.

Just over a year ago, Ethereum (ETH) made a groundbreaking upgrade with “The Merge.” Now Vitalik Buterin, the founder of Ethereum, has spoken out. In an extensive blog post, Buterin outlines goals for the further development of Ethereum and encourages the community to come up with their own thoughts. An important question here: should ETH’s blockchain be expanded to include additional functions or can such tasks be handled by layer 2 solutions such as Polygon (MATIC)?

Buterin sees a need for action in ETH staking. There, large providers such as Lido, Coinbase and RocketPool have the lion’s share of staked Ethereum under control on behalf of customers. Buterin sees some danger in this. This is because the staking pools theoretically lend themselves as a target for cybercriminals, who could then even act in the direction of a 51 percent attack. Buterin proposes to make ETH staking more attractive for smaller providers by granting them special rights in order to strengthen decentralization.

In a review of Ethereum back in August, we showed you the trends in staking and decentralized finance (DeFi). These also have an impact on ETH inflation. After “The Merge,” there were hopes that Ethereum could even become deflationary. But drops in DeFi sales have led to a slight inflation rate of 0.3 percent applying again in many weeks after all, according to data from Ultra Sound Money. Here, experts argue whether this effect is temporary or settling. What is clear is that in order to contain inflation, ETH transaction fees will have to rise – and that always happens when the network is at capacity.

Conclusion: the future of Ethereum – fine-tuning under consideration

As of yet, the proposals put forward by Buterin are not ripe for integration into a coming technological upgrade on Ethereum. However, Buterin has also done well in the past by releasing his ideas for discussion at an early stage and thus triggering further developments. The cooperation of large staking pools such as Lido will also be necessary to make staking more secure. The issue of inflation remains under observation for the time being, but does not appear to be a cause for concern. On the positive side, Ethereum’s founder Buterin does not want to rest on his laurels, but is preparing fine adjustments to underpin his position as the multifunctional cryptocurrency behind Bitcoin (BTC).

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