Unlike Bitcoin, Ethereum’s total supply and the inflation rate are not fixed by design. The Ethereum Foundation and the developers take consensus on these issues to regulate the supply.
Vitalik Buterin, the co-founder of Ethereum and the leading spokesperson of the Ethereum Foundation pointed out that while variable, the supply is far from inflationary. He tweeted,
The supply that the whitepaper says we would have today: 150.8 million Actual ETH supply today: 111.3 million So please don’t try to claim that ethereum is run by inflationist technocrats.
The increase in supply basically taxes every coin holder as the total supply increases. In the future, with full adoption and scalability, the consensus is expected to be financed by the transactions fees alone. The current annual inflation rate in Ethereum is around 4.3%, while that of Bitcoin is 1.8%.
The foundation had planned for a decrease in the rate with the introduction of Proof of Stake (PoS), but are not allowed to increase the rate of supply.
Ethereum Vs. Bitcoin Maximalists
If the supply of Ether [ETH] is fixed the rush to attain the cryptocurrency would increase and inflation is likely to increase as well. However, the developing team likes to maintain a flexible stance on the issue. Buterin added,Advertisement
Ok fine I’ll admit that technical changes and violation of guarantees are different things, and that paragraph says “technical changes will happen”, which does NOT imply that guarantees can be broken. That said, the only parties harmed by the reduced issuance are miners who were expecting PoS by now anyway
Udi Wertheimer, one the leading critics and opposer to the Ethereum fan base on Twitter pointed out that Ethereum lacks decentralization as its monetary properties can be mutated. He said Ethereum is run by ‘unpredictable technocrats.’
However, Buterin pointed out that it is no different from Bitcoin maximalist who refuse to bring changes to the protocol. He said,
there’s no governance process for mutating the monetary properties of bitcoin. But we agree that the only reason the governance process hasn’t yet tried to mutate the monetary properties of bitcoin is the social contract, right?
Ethereum 2.0 development is underway and by 2021 we can expect PoS staking to take-over PoW completely with increased scalability. Bitcoin, on the other hand, continues to rely on the growth of Layer 2 solutions like Lightning Network, Liquid Network, or even Wrapped BTC on Ethereum and other platforms for scalability.