Since EIP-1559 went into effect in August, Ethereum has now burned over a million Ether from the network. At today’s prices, that’s over $ 4.2 billion in lost value in transaction fees.
Fire the Ethereum network
Watch The Burn data reveals that the Ethereum network has reached this latest milestone. As of this writing, it shows that 1,002,000 ETH has been burnt since the London hard fork on August 5th. The network has been shown to be able to maintain its high burn rate, which saw its first billion dollars burnt in about a month.
During this time, nearly 1.5 million ethers were minted and distributed to miners as global rewards. That said, there have been times when the burn rate has exceeded the emission rate, such as earlier this month.
The London hard fork was intended to reduce transaction fees by changing Ethereum’s fee structure. Instead of having fees transferred to miners, they are now almost entirely offset by global rewards. During this time, the charges are sent to a burn pool, where the funds will never come back into circulation.
However, the fees are still sky-high on Ethereum, as evidenced by the number of ETH burned to date. Vitalik and other voices in the community are now pushing for moving some network functionality out of Ethereum’s base layer to unclog the network.
Deflationary dynamics for Ethereum?
Generally, the Ethereum community is excited about the development, seeing a high burn rate as a positive characteristic. Some even believe that this makes it a superior and “healthier” currency than Bitcoin, given the latter’s absolutely fixed supply.
However, Ethereum is still a net inflationary currency and does not have a given supply cap. Its emission percentage has decreased by 67% since EIP 1559. Although this is a significant reduction, it is not entirely “deflationary”.
A deflationary currency involves high transaction costs to finance the burn pool. While this reduced offer helps HODLers, it hurts users who are actually trying to spend and transact on the network.
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