What is Ultrasound Money

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"Ultrasound Money" is an Ethereum-related meme, emphasizing its potential to become deflationary over the long term. The fundamental concept is that if gold or Bitcoin has a capped supply and is considered "sound money," then Ethereum, with a decreasing supply, is deemed "ultrasound money."

This term was initially coined as a joke by Vitalik Buterin in August 2020 and later popularized on Twitter by Justin Drake, an Ethereum Foundation researcher, in September 2020. The concept of ultrasound money gained further traction with the support of Bankless, starting in March 2021.

Source: Twitter@drakefjustin

Technically, Ethereum's transition to "Ultrasound Money" was facilitated by implementing EIP-1559 in August 2021 and The Merge in September 2022. These upgrades significantly altered Ethereum's fee market mechanism and supply schedule.

  • EIP-1559 — More ETH burned (August 2021)

Before EIP-1559, all gas fees paid by users went to miners. With EIP-1559, a separate "base fee" is burned and removed from circulation. Consequently, the total supply of Ethereum decreases as the number of transactions in the ecosystem increases.

Source: ConsenSys
  • The Merge — Reduced ETH issuance (September 2022)

According to ConsenSys, miners received approximately 13,000 ETH per day before the transition to Proof of Stake. Since The Merge, however, only around 1,700 ETH per day is issued, reducing the total new ETH issuance by approximately 88%.

Source: Ultrasound.money

Since The Merge, the total supply of ETH has experienced a sharp decline. As of January 2023, the inflation rate is 0.012% per year, lower than Bitcoin's 1.716% per year. For the foreseeable future, as the Ethereum ecosystem continues to prosper, it seems highly likely that ETH will indeed become deflationary "Ultrasound Money."

Ethereum

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