Ethereum, one of the most important blockchain platforms in the market will be reducing its inflation by 80% in just a few months. With the Hybrid Casper upgrade, blocks will be rewarding 0.82 ETH instead of the current 3 ETH reducing inflation to 2% per year.
Ethereum’s Inflation to be Reduced
Ethereum will become a lot scarcer once the Hybrid Casper upgrade will be implemented. After different tests and discussions, the new numbers are now in place and will allow the two big ETH clients, Parity and Geth, to implement the latest upgrades. Casper – the Friendly Finality Gadget (FFG) – is also known as the hybrid Proof of Stake (PoS) and Proof of Work (PoW) Casper. 
The transition from PoW to PoS has been written in the Yellow Paper as part of the roadmap. PoW uses an important amount of energy, and has no economic finality.
The Ethereum Improvement Proposal (EIP) reads as follows:
“Transitioning the Ethereum network from PoW to PoS has been on the roadmap and in the Yellow Paper since the launch of the protocol. Although effective in coming to a decentralized consensus, PoW consumes an incredible amount of energy, has no economic finality, and has no effective strategy in resisting cartels.”
The Casper FFG contract can be layered on top of any block proposal mechanism, something that will provide finality to the underlying chain. The FFG staking mechanism requires minimal changes to the protocol, allowing the network to fully test and vet Casper FFG on top of PoW.
There are other motivations that influenced the decision to move as soon s possible to the new hybrid system. We can mention an excessive energy consumption, issues with equal access to mining hardware, mining pool centralization, and an emerging market of ASIC miners.
With the reduction of the inflation to 2% per year, the price of ETH should also be affected. There will be an increased demand for virtual currencies (more individuals entering the market), and a decreased offer (2% inflation annually). This should increase ETH’s price in the middle and long term.
