Two monetary models, one fixed and one governed

Ethereum's supply is the net result of two forces that the network adjusts over time. New ether is issued as a reward to validators who propose and attest to blocks, and ether is destroyed when the base fee of a transaction is burned. Ethereum's own documentation describes the balance between the two as what determines the resulting inflation or deflation rate, and notes that the issuance figure moves with the total amount staked rather than being fixed by a schedule.

Both forces were introduced by deliberate protocol changes. The fee burn arrived with EIP-1559, which specifies that the base fee per gas is burned rather than paid to the block producer, and the proposal is explicit about the monetary consequence: by burning the base fee, the network can no longer guarantee a fixed ether supply, and the core developers lose some control over ether's long-term quantity. The change to proof-of-stake removed execution-layer issuance entirely; Ethereum's documentation records that issuance fell from roughly 13,000 ether a day under proof-of-work to roughly 1,700 ether a day to stakers after the transition, a reduction it puts at about 88 per cent.

The design intent is not hidden. Ethereum's documentation presents the burn as a way to make ether the only asset usable for transaction fees and to counterbalance issuance, and it presents the resulting supply as dynamic and trackable in real time. That is a coherent monetary policy, and it is a policy rather than a constant: it is set by the protocol's governance process, it has been revised more than once, and the specification itself anticipates that it may be revised again.

The two models answer different questions. Bitcoin's rule answers "how much will exist in 2040?" with a number that can be computed today. Ethereum's answers the same question with a range that depends on staking participation and on how much block space users choose to buy, and the range has moved across zero: the network has been inflationary and deflationary at different times depending on demand. Neither answer is more honest than the other, but they support different claims. A fixed schedule supports a claim about scarcity. A responsive policy supports a claim about flexibility.

The trade-off runs in both directions. A supply that cannot be adjusted also cannot be adjusted when the adjustment would help, and Bitcoin's monetary policy is credible precisely because it is inflexible. A supply that can be adjusted can respond to changing conditions, and it is also exposed to the possibility that the adjustment is made badly or for the wrong reasons. A reader comparing the two should be clear about which property they are actually valuing, because the two networks are not competing on the same axis.

It is worth separating monetary policy from monetary outcome. A fixed supply does not by itself produce a stable price, and a managed supply does not by itself produce instability. Bitcoin's price has been extremely volatile despite its fixed schedule, and ether's supply changes have been small relative to the swings in its price. The supply rule shapes the long-run character of an asset; it does not determine what the asset trades at next month.