The day Ethereum (really) became deflationary

Welcome to the club, Ethereum! – It’s been almost a week since EIP 1559 was deployed on Ethereum (ETH)

via the London hard fork. In 6 days, more than 26,000 ETH have been destroyed by the network via the destruction mechanism put in place by this long-awaited update.

EIP 1559: immediate results

Over the

last few months,EIP 1559 has been at the heart of the debates within the Ethereum community. As a reminder, this EIP (Ethereum improvement proposal)

aimed to modify the fee mechanism on Ethereum.

Thus, the auction system where miners recovered the entire fee was replaced by a fee broken down into 3 parts:

  • The base fee, which represents the basic fee each user must pay to complete a transaction ;
  • Theinclusion fee, which represents the “tip” that will be recovered by the miner;
  • The cap fee, which represents the maximum amount that the user is willing to spend on the transaction.

In addition to this change, EIP 1559 introduces a deflationary mechanism via the destruction of the base fee

.

Since the London hard fork

, which was deployed on August 5, more than 26,000 ETH, or more than $81 million, have been destroyed by the network, at an average rate of just over 3 ETH per minute. <img src=”//www.w3.org/2000/svg’%20viewBox=’0%200%200%200’%3E%3C/svg%3E” alt=’Number of ETH destroyed by EIP 1559: over 26,000 ETH” /><img src=”https://yellowrocketagency.com/wp-content/uploads/2021/08/img_611649254c118.png” alt=’Number of ETH destroyed by EIP 1559: over 26,000 ETH” />Number of ETH destroyed by EIP 1559 at time of writing – Source: <a href=”https://ultrasound.money/” target=”_blank” rel=”noopener”>ultrasound.money</a> <p>Not surprisingly, the decentralized applications causing most of the destruction are the most used, namely the NFT platform Opensea and the decentralized exchange Uniswap.</p> <p><a href=”https://journalducoin.com/FTX-CTA” target=”_blank” rel=”noopener”>>> Go stock up on Ethers, sign up for the benchmark crypto exchange FTX<</a></p> <h2>Ethereum in the club of deflationary networks</h2> <p>The Ethereum network has witnessed an increase in transaction fees over the past few days. Coupled with more than 1 million daily transactions, this has resulted in the creation of several blocks thanks to which Ethereum has become a deflationary network, a historic event.</p> <p>A total of nearly 800 blocks have thus been deflationary since the rollout of EIP 1559, according to <a href=”https://carbono.com/deflationary-blocks/” target=”_blank” rel=”noopener”>data</a> from the Carbono site. This means

See also  Microstrategy continues to bet on bitcoin, despite losing USD 300 million

The number of ETH destroyed in these particular blocks was greater than the number of ETH created in the same block.

The Twitter bot @EthBurnBot has noted several of these deflationary blocks. For example, on August 11 at 1am, it detected a series of blocks with a 3.12% annual deflation, with 945 ETH destroyed for 528 created in the space of 1 hour.

Publication Twitter de EthBurnBot annonçant la destruction de 945 ETH pour 528 créés en l’espace d’1 hPublication Twitter de EthBurnBot annonçant la destruction de 945 ETH pour 528 créés en l’espace d’1 hEthBurnBot publication – Source: Twitter.

Ethereum deflation anticipated

While it was

widely expected that the ETH destruction caused by the rollout of EIP 1559 would impact inflation, the deflationary nature was not expected until later. Currently, 2-20 ETH are created with each block produced, which represents an annual inflation of about 4.5%.

However, Ethereum is expected to move from proof of work (PoW) to proof of stake

(PoS) in the first quarter of 2022 and its annual inflation is expected to drop to 0.5%. Indeed, after this transition, it will no longer be necessary to compensate miners for the cost of electricity used to perform their work.

This decrease in annual inflation coupled with the destruction of the EIP 1559 should make the issuance of ETH on Ethereum deflationary. According to estimates relayed by ultrasound.money, ETH issuance should become fundamentally deflationary around February 2022.

<img src=”//www.w3.org/2000/svg’%20viewBox=’0%200%200%200’%3E%3C/svg%3E” alt=’ETH Total Supply Fluctuation Forecast – ETH issuance is expected to become deflationary by February 2022″ /><img src=”https://yellowrocketagency.com/wp-content/uploads/2021/08/img_611649279465e.png” alt=’ETH Total Supply Fluctuation Forecast – ETH issuance expected to become deflationary by February 2022″ />Total ETH Supply Fluctuation Forecast – Source: ultrasound.money

However, time is not on its side for the Ethereum community.

See also  Binance suspends support for exchange tokens

Indeed,

the Poly-Network cross-blockchain protocol has been the target of an attack of a scale never seen before

, resulting in the loss of $600 million, including $273 million on Ethereum (even if the latest developments allow us to hope that the entire loot can be finally returned, we will talk about it in the morning on JDC).

It has probably never been more urgent and strategic to get into possession of some ethers! To do so, don’t wait any longer to register on the reference crypto exchange FTX. A lifetime discount on your trading fees is waiting for you thanks to the fact that the number of ETHs you can buy on FTX is only one of many.this to the JDC affiliate link.