- More than 300,000 ETH coins worth over $1Billion have been burned or taken out of circulation.
- The total ETH burned is expected to reach 1,783,000 by the end of this year.
Recently, the Ethereum network experienced a significant upgrade on August 5, 2021, which led to massive Ethereum burning. It is called the London Hard Fork, and the latest upgrade was about five Ethereum Improvement Proposals (EIPs). These include EIP 1559 as well, which aimed to boost the mining of the cryptocurrency and increase the network’s speed for users.
Furthermore, EIP 1559 upgrade also considered the criticism faced by Ethereum for rising transaction costs and network congestion by introducing the latest Ethereum burning method that simplified the process. Since the EIP 1559 upgrade, more than 300,000 Ethereum coins worth over $1 billion have been burned or taken out of circulation.
Role of EIP-1559 in Ethereum burning
Recently when EIP-1559 was introduced to Ethereum, the purpose of the network upgrade was to slow down the rate at which the supply of ETH escalates. But surprisingly, over the last few days, the collection of Ethereum has not grown at all. Instead, It has shrunk tremendously.
A few days back was not usual as more Ethereum was burned on the network than minted; this means there is now less ETH available today than there was yesterday. Well, Ethereum experts believe this has happened for the first time on the network.
In simple words, the EIP-1559 upgrade was a coding change to the Ethereum blockchain that allowed block sizes to expand to increase the transactions capacity on the network. As the Ethereum network has struggled with congestion over the last few years, thanks to the popularity of Non-fungible-tokens and decentralized finance apps such as exchange Uniswap and lending protocol Aave, such tools utilize up the network’s finite resources.
Another exciting part of the proposal was to make a base fee mandatory for each transaction. As before, the fee used to go to the miners who validate network transactions; now, the base fee would get burned means taken out of circulation by delivery to a wallet that cannot be accessed. The whole idea behind this was to reduce the total supply of ETH, which would result in a reduction of the price of Ethereum to meet demand.
Reasons behind the introduction of a new burning mechanism
This new burning mechanism has been quite effective as a deflationary tool, which has reduced the network’s inflation rate. Before, the Ethereum miners would receive around 13,000 Ethereum produced daily. The new mechanism has managed to fight this, decreasing ETH delivered daily and increasing Ethereum burning.
One of the reasons that contributed to the increased Ethereum burning is the existing high transaction fees on the network. The 2nd largest network handles not less than 1.2 million transactions. Due to the growing demand on the network resulting from NFT and the burgeoning niche, the need to amend the high transaction fees was quite apparent.
Ethereum burning has been relatively less this week; the amount that would be burnt in the next two months, or six months, and even a year would be beyond imagination. According to experts, if the Ethereum burning remains constant at this rate until the upcoming six months, it is expected that the total ETH burned would reach 1,783,000 by the end of this year.
After the recent introduction of the network upgrade, Ethereum experienced a resurgence in demand and price action due to its value which could be expanded with NFT and DeFi spaces alongside its status as the ‘first-mover’ in the world of blockchain.