By
Temitope Olatunji
April 18th, 2024
More than 1 million ETH worth over $4 billion have been burnt in four months since the implementation of the EIP-1559 protocol in August. The Ethereum blockchain will likely turn deflationary by early 2022.
The world’s second-largest cryptocurrency Ethereum (ETH) continues to hit milestones in its way. Ever since the London hardfork and the implementation of EIP-1559 in August 2021, more than 1 million ETH coins have been burnt.
1 million ETH (+$4 billion) has been burned since the EIP-1559 launch
H/T: @WillBeaumontt pic.twitter.com/ToGLkhw10D
— Blockworks (@Blockworks_) November 24, 2021
This amounts to a staggering $4.2 billion as of today’s ETH price. The EIP-1559 protocol implementation has reformed the Ethereum fee market while introducing a burn feature that takes a portion of the transaction fee on the blockchain out of circulation.
Some of the notable decentralized that are contributing to ETH token burning include the popular non-fungible tokens (NFT) platform OpenSea or another play-to-earn NFT game Axie Infinity. The next big contributors of transaction volumes on the Ethereum blockchain are decentralized exchanges like Uniswap, 1inch, and Sushiswap.
Besides, the ETH burning also happens through the transfer of stablecoins like Tether (USDT) and USD Coin (USDC) on the Ethereum blockchain. Finally, wallet users such as MetaMask and the ones making regular ETH transactions contribute heavily to its network activity.
📣@Ethereum transaction fee-burning mechanism has removed 1M #ETH from the network’s circulation since it came into effect.
👉https://t.co/oLDJyg9PyC pic.twitter.com/FwkmI8lL6x
— CryptoRank Platform (@CryptoRank_io) November 24, 2021
Ethereum Blockchain Continues to Remain Inflationary amid Growing Volumes of ETH Assets Burnt
One of the basic purposes behind introducing the EIP-1559 protocol was to reduce the rising gas fee on Ethereum and make it deflationary. The data from Ultra Sound Money shows that every minute 7.67 ETH is burnt. This figure goes to 11,042 ETH burned each day. As of the current rate around 4-million ETH burning would happen every year.
On the other hand, 5.4-million ETH addition happens to the Ethereum blockchain each year. Thus, the Ethereum Network continues to remain inflationary on a net basis. However, these dynamics will change the next year as the Ethereum 2.0 blockchain goes live.
Here, the Ethereum blockchain will be undergoing a major transition from the Proof-of-Work (PoW) blockchain to the Proof-of-Stake (PoS) blockchain network. Also, the staking rewards will be far lower than mining rewards. This would thus help in lowering the blockchain’s emission rate far below its burn rate thus creating a deflationary ecosystem. As per Ultra Sound Money, the peak supply of ETH will reach 119.7 million by early 2022 before starting to decline.
For a while, the world’s second-largest cryptocurrency has been trading around at $4,300 levels. The ETH supply at the exchanges has also been on a continuous decline for the last few months. Furthermore, there’s a widening gap in the supply held by the top ten whales off exchange to the supply held by the top ten exchange whales.