Ethereum becomes deflationary | An unprecedented case
Ethereum becomes deflationary | An unprecedented case Ethereum becomes deflationary | An unprecedented case

Quite recently, there was to be the first instance where the number of burned ETH managed to surpass the number of newly minted ones.

Ethereum deflationary already?

When the Ethereum fork occurred last month, resulting in the EIP-1559 assumptions, it was expected that the rate of ETH supply growth would slow down over time.

Some observers of the situation on the network of the market’s largest altcoin report that more ETH has been burned than forked in the last 24 hours. This means that less ETH was available one day than the next. Experts believe that this is the first time such a situation has occurred.

EIP-1559 enabled the expansion of block sizes, allowing more transactions to be sent across the network. The Ethereum network has struggled with congestion on a wave of NFT popularity and increased adoption of decentralized finance sector applications, such as the Aave lending protocol and the Uniswap exchange.

Part of the premise of the update was to impose a base fee on each transaction. Instead of the fees still going to the miners who verify network transactions, the base fee is burned (i.e., taken out of circulation by being sent to a wallet that cannot be accessed). The idea was to reduce the total supply of ETH, which unlike Bitcoin does not have a finite coin supply limit. As a result, the price of Ethereum was theoretically supposed to rise to meet demand.

Although EIP-1559 reduces the rate of growth of ETH supply, it does not necessarily reduce the supply of ETH. This is because with each block mined, miners can still keep new ETH. As long as the amount of newly mined ETH is higher than the burned base fees, the overall ETH supply increases.

But.

Over a 24-hour period on Thursday/Friday, the supply increase turned negative. The network burned more ETH than was paid out to miners. The scenario had a chance of succeeding when the fee subs

taw increases during periods of increased demand for Ethereum transactions.

DeFi Pulse co-founder Scott Lewis and Week in Ethereum News founder Evan Van Ness

believe this is the first time Ethereum has become deflationary.

More than 190,000 ETH have already been burned since the London hard fork was reprocessed

.

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From the Editor

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