Osho Jha is an investor, data scientist and tech company executive who enjoys finding and analyzing unique data sets for investing in both public and private markets.
With the halving capturing the attention of most investors in the cryptocurrency space as well as some mainstream press, the changes at Ethereum have gone largely unnoticed in the broader crypto community. While BTC has become an investment option for those seeking strong money principles in a time of central bank balance sheet expansion, ETH also represents strong money principles. Ethereum 2.0 has been plagued by delays – a natural part of the software development process but a primary cause of negative sentiment towards ETH. However, Ethereum 2.0 seeks to change from a PoW infrastructure to a PoS infrastructure and the magnitude of this shift, I believe, is not reflected in the price of the token.
ETH deflation - A look at supply-side dynamics
Before diving into the impact that staking could have on ETH, it is important to understand how the ETH “money supply” currently works. As we know, BTC has a fixed supply of 21 million coins and the rate at which these coins are released into the money supply decreases over time. ETH does not have a fixed supply but, like BTC, it has a declining inflation rate:Source: Ethereum white paper
There is a fixed issuance of new ETH annually. As the money supply grows, that fixed issuance becomes a smaller portion of the total money supply. As with BTC halvings, ETH over time has reduced the block reward for miners. The transition to Ethereum 2.0’s staking mechanism is set to reduce the inflation rate of ETH to 0.5%-2.0%, putting it in the same company as BTC and gold in terms of supply inflation.
I look at ETH as the fiat to BTC’s gold. Despite negative connotations in the crypto community, fiat currencies aren’t inherently bad and the main advantage of an unfixed total supply is flexibility to adjust supply during diff...