The monetary policy of Ethereum has always been a hot topic in the cryptocurrency world. Unlike the fixed total supply model of Bitcoin, Ethereum adopts a more flexible dynamic supply strategy.

After the 'Merge' upgrade in Ethereum's transition from Proof of Work (PoW) to Proof of Stake (PoS), its annual issuance rate has significantly decreased, currently maintained between 0.5% and 1.5%, with specific values depending on the staking yield situation of the network. Approximately 8,300 Ether are newly added daily, but this does not mean an increase in net supply.

The key lies in the implementation of the EIP-1559 protocol, which stipulates that the base fee for each transaction will be burned. Data from 2023 shows that approximately 0.7% of the circulating supply has been reduced solely through the burning mechanism. In cases of high network activity, the amount burned may even exceed the amount issued, leading to a deflationary phenomenon.

The introduction of the staking mechanism has added new variables to Ethereum's economic model. Currently, over 35 million Ether are staked across the network, with annual yields for validators ranging between 4% and 6%. It is worth noting that even if 100% of the Ether in the network is staked, the annual inflation rate will be limited to within 1.52%, and this rate will gradually decrease over time.

The participation of institutional investors is reshaping the Ethereum ecosystem. By 2025, the number of Ether held by publicly listed companies has exceeded 730,000, a trend that is quite similar to the 'institutional bull market' Bitcoin experienced in 2020. There is a yearly correlation of up to 90.9% between the amount staked and the price of Ether, indicating that the increase in staking activities helps stabilize the coin price.

With the improvement of the regulatory environment, especially the U.S. Securities and Exchange Commission (SEC) allowing staking activities at the end of May 2025, there has even been the emergence of Ethereum ETFs that include staking provisions, which further promotes long-term holding by institutional investors.

Therefore, when assessing the monetary policy of Ethereum, one cannot only focus on the increase in the issuance of digital currency but also needs to consider the comprehensive impact of the destruction mechanism and staking lock-up. In the case of active on-chain transactions, Ethereum may even achieve a continuous deflationary state, which provides potential support for its long-term value.