EIP-1559, Ethereum’s widely-supported fee-burning proposal that began in August 2021, has already removed 2 million ETH from circulation.
According to statistics from ultrasound.money, the world’s most popular smart contract network burnt more than 2 million ETH today. Since August 2021, when Ethereum deployed its London hardfork, the total ETH supply has been under deflationary pressure as a result of a fee burning proposal known as EIP-1559. Arguably Ethereum’s most popular upgrade to date, EIP-1559 established a way for each Ethereum transaction to burn a part of the gas cost. EIP-1559 was created to stabilise Ethereum’s fee market, since Ethereum’s prior fee structure was based on an auction mechanism, making transaction prices unpredictable. With EIP-1559, Ethereum users pay a basic price for transactions and an optional tip to miners to expedite their transaction during moments of heavy congestion. Additionally, EIP-1559 exerts deflationary pressure on ETH, reducing the supply over time.
According to ultrasound.money, Ethereum is now burning little more over 6 ETH every minute. A significant portion of it is consumed on OpenSea, the world’s largest non-ferrous metals trading platform. While Uniswap was formerly the network’s largest gas consumer, a growth in the NFT market has pushed OpenSea to the top, with ETH transfers gaining second place ahead of Uniswap transactions.
Ethereum Makes Merger Preparations
Following the London hardfork, Ethereum’s next significant protocol change will be the long-awaited transition from Proof-of-Work to Proof-of-Stake consensus. The upgrade, dubbed “the merge,” will see the consensus layer of the blockchain (otherwise known as the Beacon Chain) join with the execution layer (Ethereum mainnet).
The anticipation for the merging has grown this week as Ethereum successfully ran through the event on the Kiln testnet (however Tim Beiko of the Ethereum Foundation reported that one client failed to create blocks during the runthrough). Prior to this week, supporters of the leading smart contract network had been counting down to the merger; the transition to Proof-of-Stake is believed to be one of the most significant events in the blockchain’s history. Apart from implementing a critical protocol upgrade that would reward ETH stakeholders rather than miners, Ethereum is predicted to become 99.95 percent more energy-efficient, which should be appreciated by both the crypto community and the mainstream.
Notably, once the merger occurs, it will significantly lower ETH emissions. The ETH supply now grows by around 4.5 percent each year to compensate miners, but with Proof-of-Stake, the yearly emission is predicted to be closer to 1%. Given that EIP-1559 burns 6 ETH per minute on a consistent basis, the rate of ETH burnt is projected to exceed the amount granted in block rewards to validators. ETH would then become a deflationary asset. Though the official launch date has not been established, the merger is probably set for June 2022.
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