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Author: Admin | 2025-04-27
The Merge represented the Ethereum network's transition from proof-of-work to proof-of-stake which occurred in September 2022. The way ETH was issued underwent changes at time of that transition. Previously, new ETH was issued from two sources: the execution layer (i.e. Mainnet) and the consensus layer (i.e. Beacon Chain). Since The Merge, issuance on the execution layer is now zero. Let's break this down.Components of ETH issuanceWe can break the supply of ETH into two primary forces: issuance and burn.The issuance of ETH is the process of creating ETH that did not previously exist. The burning of ETH is when existing ETH gets destroyed, removing it from circulation. The rate of issuance and burning gets calculated on several parameters, and the balance between them determines the resulting inflation/deflation rate of ether.ETH issuance tldrBefore transitioning to proof-of-stake, miners were issued approximately 13,000 ETH/dayStakers are issued approximately 1,700 ETH/day, based on about 14 million total ETH stakedThe exact staking issuance fluctuates based on the total amount of ETH stakedSince The Merge, only the ~1,700 ETH/day remains, dropping total new ETH issuance by ~88%The burn: This fluctuates according to network demand. If an average gas price of at least 16 gwei is observed for a given day, this effectively offsets the ~1,700 ETH that is issued to validators and brings net ETH inflation to zero or less for that day.Pre-merge (historical)Execution layer issuanceUnder proof-of-work, miners only interacted with the execution layer and were rewarded with block rewards if they were the first miner to solve the next block. Since the Constantinople upgrade in 2019 this reward was 2 ETH per block. Miners were also rewarded for publishing blocks, which were valid blocks that didn't end up in the longest/canonical chain. These rewards maxed out at 1.75 ETH per ommer, and were in addition to the reward issued from the canonical block. The process of mining was an economically intensive activity, which historically required high levels of ETH issuance to sustain.Consensus layer issuanceThe Beacon Chain went live in 2020. Instead of miners, it is secured by validators using proof-of-stake. This chain was bootstrapped by Ethereum users depositing ETH one-way into a smart contract on Mainnet (the execution layer), which the Beacon Chain listens to, crediting the user with an equal amount of ETH on the new chain. Until The Merge happened, the Beacon Chain's validators were not processing transactions and were essentially coming to consensus on the state of the validator pool itself.Validators on the Beacon Chain are rewarded with ETH for attesting to the state of the chain and proposing blocks. Rewards (or penalties) are calculated and distributed at each epoch (every 6.4 minutes) based on validator performance. Validator rewards are significantly less than the mining rewards that were previously issued under proof-of-work (2 ETH every ~13.5 seconds), as operating a validating node is not as economically intense and thus does not require or warrant as high a reward.Pre-merge issuance breakdownTotal ETH supply: ~120,520,000 ETH (at time of The Merge in September 2022)Execution layer
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