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- Over $1 billion worth of ETH tokens have been destroyed or removed from circulation.
- By the end of the year, the total amount of ETH burned is estimated to exceed 1,783,000.
On August 5, 2021, the Ethereum network had a substantial upgrade, which resulted in catastrophic Ethereum burning. The latest update focused on five Ethereum improvement proposals and is known as the London Hard Fork (EIP). These include EIP 1559, which attempted to increase the network’s performance for users while also boosting cryptocurrency mining.
Furthermore, the EIP 1559 upgrade addressed criticism of Ethereum’s growing transaction prices and network congestion by adding a new Ethereum burning technique that made the procedure easier. More than 300,000 Ethereum tokens worth over $1 billion have been destroyed or removed from circulation since the EIP 1559 upgrade.
EIP-1559’s role in Ethereum’s burning
The goal of EIP-1559, which was recently introduced to Ethereum, was to cut down the rate at which the quantity of ETH increased. Surprisingly, the Ethereum collection has not increased in the last several days. Instead, it has dropped dramatically.
More Ethereum was burned on the network than created a few days ago, which implies there is now less ETH accessible now than there was yesterday. Experts on Ethereum believe this is the first time this has happened on the network.
In layman’s terms, the EIP-1559 upgrade was a coding change to the Ethereum blockchain that allowed block sizes to be increased, hence increasing the network’s transaction throughput. Because of the popularity of Non-fungible-tokens and decentralised banking apps like Uniswap and loan protocol Aave, the Ethereum network has faced congestion in recent years.
Another intriguing aspect of the concept was the requirement of a flat cost for each transaction. Previously, the cost went to the miners who validated network transactions; now, the base fee would be burned, which means it would be sent to a wallet that could not be accessed. The goal was to lower the overall quantity of ETH, which would cause the price of Ethereum to fall in order to fulfil demand.
New burning mechanism
This new burning process has shown to be a very successful deflationary tool, lowering the network’s inflation rate. Previously, Ethereum miners would receive approximately 13,000 Ethereum each day. The new technique has been successful in combating this, resulting in a decrease in daily ETH deliveries and an increase in Ethereum burning.
The existing high transaction costs on the network are one of the factors that contributed to the increasing Ethereum burning. The second-largest network processes about 1.2 million transactions every day. Because of the increased demand on the network as a result of NFT and the emerging specialty, it was clear that the high transaction costs needed to be changed.
The truth is, the quantity of Ethereum burned this week was relatively low; the amount burned in the next two months, six months, or even a year would be unimaginable. Experts estimate that if Ethereum burning continues at this rate for the next six months, the total amount of ETH burned will reach 1,783,000 by the end of the year.
Due to its value that may be enhanced with NFT and DeFi spaces, as well as its role as the ‘first-mover’ in the field of blockchain, Ethereum enjoyed a comeback in demand and price action following the recent launch of the network upgrade.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
