Ethereum faces deepening supply constraints as permanently lost Ether (ETH) due to technical flaws and user errors has surged 44% since March 2023, with current inaccessible holdings exceeding 913,000 ETH. This accumulation represents complicated dynamics for Ethereum’s circulating supply amid its deflationary transition.
Notable incidents drove the irreversible losses, including 306,000 ETH locked in Parity’s 2017 multisig wallet bug, 60,000 ETH frozen in QuadrigaCX exchange’s flawed contract, and 11,500 ETH stranded during the Akutars NFT minting malfunction. This coincides with Ethereum’s EIP-1559 upgrade burning approximately 5.3 million ETH since August 2021 and The Merge’s transition to proof-of-stake in September 2022, which reduced new ETH issuance by nearly 90%.
The combined effect of lost assets and intentional supply constraints creates market pressures while posing systemic challenges. Though decreased circulating supply may support valuation, stakeholders express concern regarding permanent capital erosion and implications for ecosystem resilience during periods of prolonged network stress.