The Tokenomics of Ethereum
WildFlower.Eth🌺
How Ethereum has remained the second most valuable cryptocurrency for 10 years
Ethereum was created in 2015 to solve the limitations of Bitcoin.
Vitalik Buterin and a group of co-founders envisioned a platform that could support smart contracts and decentralised applications.
They raised over 31,000 BTC—worth about $18 million at the time—in one of the first token crowdsales.
Ethereum was launched with no mining rewards initially, just a genesis block preloaded with ETH from the sale.
Ethereum Team
Ethereum started with a core founding team including Vitalik Buterin, Gavin Wood, Joseph Lubin, and Charles Hoskinson.
From day one, the vision was decentralization.
The Ethereum Foundation was formed as a non-profit to support development.
Over time, protocol decisions moved from the foundation to community-driven Ethereum Improvement Proposals, or EIPs.
There are now over 1,000 active contributors, and tens of thousands of developers building on Ethereum.
Supply
Ethereum's initial supply was 72 million ETH at launch.
Unlike Bitcoin, Ethereum did not have a fixed supply cap.
However, it became deflationary after EIP-1559 in 2021, which began burning a portion of transaction fees.
In 2022, the Merge transitioned Ethereum to proof-of-stake, dropping issuance by over 90%.
Since then, more ETH has been burned than created.
As of now, circulating supply is around 120 million ETH, but net issuance is negative.
Token Demand
ETH is in demand for several reasons:
It’s needed to pay gas fees.
It’s the base currency of the largest smart contract platform.
It’s used for staking.
It powers DeFi, NFTs, and DAOs.
In 2021, Ethereum settled over $11 trillion in transaction volume—more than Visa.
At its peak, $100 billion worth of assets were locked in DeFi protocols on Ethereum.
Token Utility
ETH’s utility includes:
Paying gas fees
Staking to secure the network
Collateral in DeFi lending platforms
Purchasing NFTs
Governance via liquid staking protocols
Participating in rollups and L2 bridges
Running nodes and validators
Token wrapping and bridging across chains
Accessing services in decentralized autonomous organizations
Token Issuance
At launch, 72 million ETH were allocated:
60 million ETH to contributors in the ICO
12 million ETH to the Ethereum Foundation and early contributors
Initially, ETH was issued through mining at about 5 ETH per block.
After several upgrades, block rewards dropped, and with the Merge, ETH issuance now comes through staking.
Currently, around 0.2% to 0.5% new ETH is issued per year—while more is being burned via EIP-1559.
Token Incentive
Why do people hold ETH?
To earn staking rewards—currently around 3 to 5% APR
To speculate on future price appreciation
To participate in DeFi, DAOs, and NFT ecosystems
To hedge against inflation
To gain access to Web3 services
To use as a settlement layer for dApps
Token Allocation
83% of ETH supply is in circulation
Around 20 million ETH is staked
Over 3.5 million ETH has been burned since EIP-1559
Foundation and team allocations are transparent, and most early ETH is now in public circulation
Ethereum is one of the most decentralized token distributions in crypto
Future Prospects
Why is ETH expected to grow stronger?
It’s the default platform for DeFi, NFTs, and DAOs
Ethereum is moving toward full scalability with sharding and rollups
Layer 2 adoption is increasing—over $35 billion in value on L2s
Real-world adoption is coming—Ethereum Spot ETFs are now approved
ETH is deflationary and economically secure
Ethereum is the most actively developed chain in crypto—by far
Other Tokenomic Impact Factors
MEV: Miner Extractable Value impacts gas dynamics and validator behavior
Ecosystem adoption: From stablecoins like USDC and DAI to Fortune 500 integrations
Institutional interest: BlackRock, Fidelity, and others now offer Ethereum exposure
Composability: ETH is deeply embedded in every major dApp on-chain
Regulatory clarity: Ethereum is increasingly seen as a commodity, not a security
Ethereum's tokenomics have evolved— from high inflation and mining rewards, to deflationary staking and smart contract utility.
ETH isn’t just a token.
It’s the fuel, the stake, the collateral, and the backbone of decentralized finance.
To learn more about ethereum, visit
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Written by
WildFlower.Eth🌺
WildFlower.Eth🌺
Favour Onukogu is a Product Manager, UX Writer & now studying to be a smart contract developer. She is passionate about using user behavior to transform products to meet business expectations. She has been endorsed as an Enterprise Design thinking practitioner by IBM and a certified Digital Marketer by Google. She started her career working creating content for several blogs including SheLeadsAfrica & TEDx Port Harcourt. She has worked with several startups including an Agritech, Coworking Hub, Consulting firm, and currently, a crypto exchange platform where she works as a Creative Strategist where she has created solutions to shorten customer response time & curb fraud issues on social media In 2020, she founded BookQuest Africa, a peer-to-peer sharing platform for book lovers, where she guides a team of developers & designers to build the BookQuest Platform Her vision is to help founders and product teams understand problems, validate business models & create Impactful solutions. When she's not working, she is reading a book, watching videos on YouTube (which she plans to product manage), or tweeting furiously on Twitter You can find some of her works here: https://onukogufavour.medium.com/ Check her portfolio: https://sites.google.com/view/favouronukogu-portfolio/home