Ethereum's circulating supply has been on the rise for the past 72 days, marking its longest inflationary period since the Merge. This unexpected surge can be attributed to a recent update called "Dencun."

Prior to the Merge, Ethereum's block rewards went to miners who secured the network through proof-of-work. After switching to proof-of-stake, burning transaction fees became the primary way to control ETH issuance. Dencun however, created space for layer-2 transactions (blobs) to settle within blocks without competing with regular users for space.

This new efficiency combined with proto-danksharding (a data availability solution) significantly reduced competition for block space. With everyone having ample space, base fees plummeted. Lower fees translate to less ETH burned per block, tipping the scales towards inflation.

While the situation might seem concerning, it's important to remember the bigger picture. Ethereum has overall burned a significant amount of ETH since the Merge, with the inflationary period being a temporary blip. The long-term goal of reducing ETH supply remains on track.