After the launch of the London hard fork on the mainnet of the second-largest cryptocurrency by market capitalization Ethereum ($ETH), an astonishing 3.46 million ETH tokens valued at well over $6.5 billion, have so far been burned.
According to available data, the Ethereum blockchain sees around 146,000 ETH tokens get burned every month, further helping reduce the cryptocurrency’s circulating supply. The London hard fork included the implementation of Ethereum Improvement Proposal (EIP) 1559, which changed the way transaction fees on the network work.
Instead of an auction system, users now pay a base fee for their transaction to be processed by miners, and can alternatively tip miners to get their transactions to be processed faster.
Miners aren’t paid the base fee as it could incentivize them to artificially congest the network to keep it high and earn more. Instead, the base fee is burned, effectively removing ether from circulation forever. It rises when there’s higher demand, and drops when demand is lower.
To appreciate the scale of this phenomenon, consider that the $6.68 billion in annihilated ETH could purchase around 19,085 single-family homes, assuming an average price of $350,000 per dwelling, as Benzinga reported.
The cause of the Ethereum network’s shrinkage is primarily regular ETH transfers, resulting in the burn of nearly 300,000 ETH. Notably, transactions involving non-fungible tokens (NFTs) on Opensea have incinerated over 230,000 tokens, while popular decentralized exchange Uniswap has been responsible for burning 200,000 ETH.
Notably, after the Ethereum network’s Merge, which saw it transition from a Proof-of-Work into a Proof-of-Stake consensus algorithm last September, the network’s circulating supply has been dropping. Were it not for The Merge, the network would have produced an additional 6.5 million ETH.
At the current rate, Ethereum’s supply is dropping by around 0.1% a year, effectively offsetting the issuance of new tokens. If the Merge hadn’t occurred, the cryptocurrency’s supply would be swelling by around 3.3% a year.
Featured image via Unsplash.