More than 1.2 million ethers have been burned since the Ethereum hard fork “London”. Equivalent to: $ 5 billion.
On August 5th the time had come: Ethereum received the upgrade EIP-1559 implemented with the hard fork “ London ”. In addition to expanding the block size and introducing a uniform basic fee, the Ethereum Improvement Proposal also contained a combustion function: the transaction fees have been burned since then and thus removed from the amount in circulation. The balance after less than five months: Over 1.2 million ETH have been burned since “London”, as data from Dune Analytics show. Equivalent to: $ 5 billion.
Ethereum fire accelerator
The ongoing hype about NFTs, DeFi and blockchain games, which are essentially based on the Ethereum blockchain, is responsible for the overheating internal combustion engine. With over 135,000 ethers burned (USD 500 million), the NFT marketplace Opensea is the largest instantaneous water heater. The decentralized exchange (DEX) Uniswap V2 ranks third with 112,000 ETH (458 million USD). The play-to-earn game Axie Infinity is in eighth place with over 16,000 ETH (59 million US dollars).
Deflation in moderation
In terms of price development, the combustion mechanism is not insignificant. Supply and demand determine the price – also with Ethereum. The throttling of the amount in circulation can cause excess demand in bullish market phases and thus boost the price.
Another side effect: deflation. If more ether is removed from the amount in circulation than miners add new ones, the inflation rate gradually levels off. In the event of high trading activity, the mechanism ultimately leads to a shortage of ether stocks. This happened on a few trading days in September, October and November on which up to 16,800 ethers were burned a day. In contrast, the ether supply is currently growing by an average of 13,000 to 14,000 ethers per day.
A tiresome subject
One side effect that was actually intended is still a long time coming: the reduction in transaction fees. EIP-1559 has doubled the block size to 25 million gas units. The background: With the transaction level remaining the same, the enlargement ensures a 50 percent utilization. This is supposed to push the basic fee down to an affordable level.
Only: the rush to Ethereum has not decreased. On the contrary, at the beginning of the year it was decentralized finances and NFTs that clogged the transaction channels, metaverse worlds and blockchain games such as Axie Infinity, Decentraland or The Sandbox joined them in the middle of the year. According to Bitinfocharts , the average transaction fees (gas fees) are currently 0.0099 ETH – around 37 USD.