More than a million ETH was burned three months after the EIP-1559 implementation but this doesn’t really make the cryptocurrency deflationary and we find out why in today’s Ethereum news.
Since EIP-1559 happened, more than a million ETH was burned from circulation and at today’s prices, that’s over $4.2 billion in value. The data from Watch the Burn reveals that the etheruem network reached a milestone and it shows that 1,002,000 ETH was burned since the London Hard Fork on August 5th and the network proves capable of maintaining the high burn rate that saw its first $1 billion destroyed in a month.
About 1.5 million Ether was minted and distributed to the miners as the block rewards and with that said, there were other times when the burn rate surpassed the issuance rate like earlier this month. The London Hard Fork was intended to bring the transaction fees lower by changing Ethereum’s fee structure but instead of having the fees transferred to miners, they are compensated thorugh the block rewards. In the meantime, the fees are sent to a burn pool where the funds won’t come back into circulation. However, fees are still insanely high on Ethereum as can be seen from the number of ETH burned to date. Vitalk and other members of the community voiced in favor of moving certain network functionalities of the base layer in order to unclog the network.
The Ethereum community is quite excited by the development most of the time and it saw a huge burn rate as a good characteristic. However, some even think that it makes it superior to Bitcoin because of its fixed supply. However, Ethereum is still a net inflationary currency with no supply cap and its issuance percentage dropped by 67% since EIP 1559 but it still isn’t deflationary. A deflation implies huge transaction fees to fund the burn pool and while this does reduce the supply and help HODLERs, it hurts other users that are trying to spend and transact on the network.
As recently reported, Ethereum fees were the subject of discussion for a few months now as the average transaction costs often surpass $50 depending on the day. The bad image came up after Zhu announced he was leaving the network and he will be taking his capital with him as Ethereum didn’t serve the regulator users. Avalanche and Solana on the other hand positioned themselves as low-cost and being uncongested.