Ethereum EIP-1559 Burns More ETH Than Ethereum Miners Hold

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Ethereum EIP-1559 Burns More ETH Than Ethereum Miners Hold
Ethereum EIP-1559 Burns More ETH Than Ethereum Miners Hold

The London hard fork launch which included the EIP 1559 improvement proposal in the Ethereum network at the beginning of August has caused Ethereum to face deflation issuance for several weeks in a row.

Ethereum Burns Around 80,968 ETH Every Day

According to WatchTheBurn data on November 21, around 80,968 ETH are burned every day, which is 66.48% of the net decrease in coins in circulation. So far, in less than 4 months, approximately 961,920 ETH (approx. $4.1 billion) have been permanently destroyed, while the miner’s current balance is 243,690 ETH. 

Net sales also fell to 484,982 ETH, which was 66.48% of the amount of ether in circulation after incineration. If this number exceeds 100%, it means that the number of ETH burned has exceeded the number of coins issued, which introduces the cryptocurrency into the ultrasonic currency.

Before August 4th, miners were rewarded in so-called first-price auctions. With the introduction of EIP-1559, the original price auction system was replaced by fixed price sales or basic fee models, which made cost estimation very easy. Essentially, EIP-1559 enables reliable measurement of the price of natural gas. In addition, the base costs are burned and not passed on to the miners.

The ETH supply decreases whenever more ETH is destroyed via the fee burn program than ETH is created via issuance. Better put, fee burn is a scarcity engine fuelled by Ethereum’s transactional utility.

More Users are Migrating to the L2 Protocol to Avoid High Gas Fee

On the flip side, with Ethereum prices rising, gas fees are still a tedious ordeal for users. Although the average cost of ERC-20 transfers has dropped from $55.65 five days ago to $23.90, complex transactions like transfers between DeFi protocols continue to rise. According to data from Etherscan, the average cost to transfer and interact with Uniswap is as high as $151.15 at the time of writing.

The number of coins burned by OpenSea in the NFT market is the largest at 106,411 ETH, followed by the Ethereum transfer, which is currently 93,696 ETH.

Because of the high transaction fees associated with the Layer 1 Ethereum network, users are becoming increasingly bored and migrating to Layer 2 solutions like Arbitrum One.

According to data from L2 Beat, the Total Value Lock-up (TVL) of various Layer 2 networks has continued to rise recently, with a lock-up value of $5.6 billion. Arbitrum is a Layer 2 aggregation protocol aimed at expanding Ethereum and is currently valued at $2.67 billion.