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Raging Inferno: Over 3% of All Ether Supply Has Been Burned Since Implementing EIP-1559

source-logo  news.bitcoin.com 12 February 2024 07:45, UTC

Ethereum has shed a significant part of its supply since the London upgrade, applied in August 2021. According to ultrasound.money, a portal that records several statistics associated with the ETH burn, over 4 million ether (3.2%) have been removed from the network since the adoption of EIP-1559, which changed how fees are calculated.

EIP-1559 Burns Over 3% of Its Ether Supply

Ethereum has reduced its supply significantly since the London upgrade, which was applied to the network in August 2021. The implementation of Ethereum Improvement Proposal 1559 (EIP-1559), a proposal that changed how fees are calculated and introduced a burn rate depending on the activity of the network, has introduced a significant decrease in the issuance of ether.

According to ultrasound.money, this decrease has reached over 3% of the current supply of ether in the whole market. Over 4 million ETH has been burned due to this implementation, whose primary intention was to even out fees and make it more predictable but also included sending some ETH to a null address, essentially burning it from the total supply.

The EIP-1559 proposal and its subsequent effects originated the ultrasound money meme, based on the idea that Ethereum could become deflationary – with its issuance being lower than its burning – in times of high network usage. However, this has not been the case, as more ether has been created than burned since the London hard fork (almost 7 million).

This is likely related to the migration that Ethereum’s activity has experienced from L1 to L2 platforms, like rollups, which have become the principal scaling solution to the chain. This could be exacerbated with the future Dencun upgrade, which includes EIP-4844 (also known as Proto-Danksharding) that seeks to alleviate the already low fees of rollups by creating an alternative market for “blobs.”

However, the relevance of EIP-1559 for the network must not be underestimated, as it has contributed to maintaining ether’s supply inflation rate at close to 1% yearly.

What do you think about EIP-1559 and its effect on ether’s supply? Tell us in the comments section below.