On July 25, a significant amount of 6,746.96 Ether, equivalent to $12,546,447 based on Ethereum’s current value at the time of publication ($1,859.57), was burned from Ethereum transactions. Burning refers to the process of sending a coin or token to an unusable wallet, effectively removing it from circulation. This action helps to reduce the overall supply of the token, impacting its scarcity and potentially influencing its value within the ecosystem.
On August 5th, 2021, a significant upgrade named EIP-1159 was integrated into the Ethereum blockchain. This crucial Ethereum improvement proposal brought about a drastic change to the fee model. Under this new system, every transaction incorporates a variable base fee, which dynamically adjusts based on the prevailing demand for block space.
The uniqueness of this upgrade lies in the fact that the base fee is permanently removed from circulation through burning, resulting in a reduction of the Ether supply that will persist indefinitely. This change has far-reaching implications for the Ethereum ecosystem, addressing scalability and potentially impacting the value and scarcity of Ether in the long term.
Currently, Ethereum is issuing new Ether at an annual rate of 4%. However, with the upcoming Ethereum 2.0 upgrade, this issuance rate is anticipated to decrease significantly, reaching approximately 0.5-1%. Consequently, there is speculation that the burn rate of Ether, due to EIP-1559 and other factors, could surpass the token’s issuance rate, leading to ETH becoming a deflationary currency.
Buy Crypto NowNotably, the net annualized issuance rate for Ether observed yesterday was -8.65%, indicating that more Ether was burned than newly issued, which hints at the deflationary potential of the cryptocurrency in its current state.
