Key Takeaways
- EIP-1559 was a code change that enabled transaction fees to be burned.
- Ethereum is now under deflationary pressure.
- The main effect is an expected rise in the price of Ethereum.
In the last 24 hours, ETH burned surpassed ETH created. This implies that today's coin supply is lower than yesterday's. Experts say this is a first for the network.
Related post: Vitalik Buterin Expresses Confidence in Ethereum following Successful Update
EIP-1559 was a code modification suggested to the Ethereum blockchain to increase block size and therefore transaction volume. Due to the popularity of NFTs and decentralized financial apps (like Aaves Lending and Uniswap Exchange), the Ethereum network has struggled to avoid congestion.
The aim is to charge a flat fee for each transaction. The charge is burned instead of paid to miners ( This means they are taken out of circulation by sending them to an inaccessible wallet). The idea was to decrease the total amount of ETH, which unlike BTC has no upper limit.
Related post: As EIP 1559 is Authorized for July, Ethereum Could become a Deflationary Asset
EIP-1559 just slows the growth rate of ETH supply, not the total quantity. This is because miners must keep the newly minted Ethereum with each block generated. So long as the newly generated money surpasses the basic fee. The ETH supply is growing.
In only 24 hours, supply growth became negative. The amount burned surpassed the miner's share. As a consequence of increasing demand for Ethereum transactions, the basic fee may rise.
Deflationary Ethereum is a new concept to many crypto professionals including DeFi Pulse co-founder Scott Lewis and Week in Ethereum News creator Evan Van Ness.
Illustration showing ethereum's first day of deflation.
— Scott Lewis (@scott lew is)
This is "back of the envelope math," not "I checked on @trueblocks for 24 hours."
This means that we are now emitting 9.45 ETC per minute, while we are already consuming 9.6 ETC.
3 September 2021 — Evan Van Ness
Since August 5, about 188,000 Ethereum had been burned. The website monitoring the code says that's $736 million.
The change has increased the coin's worth. Ethereum's price has increased from $2,516 on August 4 to $3,926 today, a 56% gain in only 31 days.
Are you excited about ETH’s upgrade? If so, predict its prices for December 2021.
