Ethereum becomes deflationary as degens hop on XEN bandwagon

The network has entered its most prolonged period of token deflation since the Merge as users rushed to mint XEN tokens, driving high gas consumption.

According to data, Ethereum supply started decreasing on October 8, 5 pm UTC. Since then, the total amount of ETH in circulation has decreased from 120,534,227 to 120,529,486, marking the first such deflationary turn when more tokens are burnt than minted.

Gas on Ethereum refers to the variable expense of making any sort of transaction on the network and is paid in its native currency, Ether. Such fees help keep the blockchain secure, as having to pay for every computation executed on the network prevents malicious actors from spamming it. Most gas money goes to validators for their work running and securing Ethereum, but a portion of it is destroyed to limit the ETH supply and sustain gas prices.

Typically, when network usage is high, gas prices go up as well, as more people tip validators to bump themselves in the list of pending transactions. The same thing happened when people rushed to mint XEN — the native token of the newly launched XEN Project — causing the ETH issuance to fall and gas prices to rise. Since October 8, users have paid almost $4.5 million in gas fees for a token with a market cap of $500,000.

XEN Project is the brainchild of Jack Levin, an early Google engineer and crypto influencer, who designed XEN to be a “community building crypto asset” with “no intrinsic value” that will become disinflationary “as more and more people join and participate in minting.”

The token price briefly pumped to $1.04 on October 9 before crashing to a fraction of a cent. Currently, it can be either minted directly from the smart contract on Ethereum or bought on Uniswap and MEXC Global. However, there is very little liquidity, and some members of the crypto community suspect it may be a scam.