The daily supply of Ethereum is under heavy pressure as the leading smart contract platform now burns thousands of ETH per day.
Etherchain, an Ethereum on-chain monitoring tool, shows that the second-largest crypto asset is now torching 4.23 ETH per minute, which equates to 6,091.2 ETH burned per day, worth over $19 million at time of writing.
Etherchain also indicates that the network has burned a total of 54,482 ETH, worth over $172 million, since Ethereum launched the London hard fork on August 5th.
The critical update consists of several Ethereum improvement proposals, including EIP-1559, which introduces a fee-burning mechanism to the network. EIP-1559 permanently removes a certain amount of ETH from the circulating supply each time a transaction is processed.
Crypto analytics platform Glassnode says the burning mechanism is having a significant impact on ETH’s daily supply.
“As on-chain activity increases, more transaction fees are paid by users, and thus more ETH is burned. This mechanism, therefore, acts to translate economic activity on the Ethereum blockchain into scarcity for the ETH token. Since the launch of EIP-1559, the average burn/block has been about 0.71 ETH/block. This means the effective issuance rate of ETH supply has slowed by 36%.”
Glassnode adds that under certain conditions, the fee-burning mechanism that came with the London hard fork can make Ethereum a deflationary asset.
“In the extreme cases of high demand for block-space, net ETH issuance can indeed become net deflationary, where more ETH is burned than is issued. It is noted that under the current Proof-of-Work issuance schedule, such a level of deflation would require network usage significantly higher than that expressed today.”
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