A Million ETH Was Burned Since the Launch of EIP-1559

Research firm CryptoRank calculated that since the activation of the EIP-1559 protocol in August 2021, the London hard fork has burned more than 1 million ETH worth about $4.295 billion at the time of this writing.

The EIP-1559 protocol changed the limits for gas fees, as well as introduced the function of burning part of the transaction fees in ETH, thus removing them from circulation.

Most of the ETHs burnt came from transactions from the OpenSea.io NFT platform, the Axie Infinity game, regular ETH transfers by users of MetaMask wallets, and decentralized exchanges like Uniswap, 1inch, and Sushiswap. Additionally, ETH are burnt during stablecoin transfers like Tether (USDT) and USD Coin (USDC) built on the Ethereum blockchain.

According to Ultra Sound Money, 7.67 ETH is burnt every minute, and up to 11042 ETH is burnt every day. At this rate, about 4 million ETH is burned every year. But the blockchain generates about 5.4 million new ETH per year. Thus, the Ethereum network is still inflationary in net terms.

But after the launch of the Ethereum 2.0 update, the release rate of the new ETH will be lower than the burn rate, which will change the system to deflationary. This is due to the replacement of Proof-of-Work consensus with Proof-of-Stake consensus, where staking rewards will be lower than mining rewards. The Ultra Sound Money predicts that the peak supply of ETH will reach 119.7 million coins in early 2022 before the beginning of decline.

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