The past week was the first ever for Ethereum where burned ETH exceeded created ETH.
Price and transactions increase burned ETH
Since the London update was introduced, a portion of the fees paid by those who make a transaction on Ethereum’s blockchain are burned. Until now, the volume of burnt ETH had never exceeded that of ETH created from scratch to reward miners, but the balance of the last week has been different.
The fact is that the number of transactions recorded on Ethereum’s blockchain has been remarkable in recent days, peaking at even more than 1.5 million transactions on October 28.
The new all-time record high price for ETH has moved the markets a lot, causing the number of daily transactions to soar. On September 26, there were just over one million transactions, so on October 28, there were almost 50% more than on September 26. Since October 25, they have been at or above 1.3 million a day.
More transactions means more fees, and more fees means more ETH burned, so as long as the volume of daily transactions recorded on Ethereum’s blockchain remains this high, it is safe to imagine that the deflationary process could go on.
Deflation begins in anticipation of PoS
Gas is definitely high, with an average cost per transaction exceeding $50 in recent days. This rate is unlikely to fall much in the coming days, or weeks, if the price of ETH remains high, or even rises further.
In order for Ethereum to produce deflationary blocks, i.e. with more ETH burned than created, the price must remain more or less above 150 gwei.
According to data from ultrasound.money, the main source of burn is the Uniswap DEX, with ETH transactions in second place, and USDT transactions in third. It is worth noting that in fourth place is the world’s leading marketplace for NFTs: OpenSea.
At this stage a total of about 15,000 ETH are burned every day, while only a little over 8,000 ETH are created, so the final balance is a reduction of about 7,000 ETH per day. In total there are about 118 million ETH in circulation today.
It is worth mentioning that the fees for any transaction recorded on the Ethereum blockchain must be paid in ETH, even if the transaction involves USDT, NFTs or other ERC-20 tokens.
Since the London update was introduced, more than 724,400 ETH have been burned, although usually the number of ETH created is higher. In fact, since August 6, Ethereum’s total supply has grown from 112 million to 118 million ETH.
It is also worth bearing in mind that when Proof-of-Work is replaced by Proof-of-Stake, the number of ETH created will decrease a lot, although on the other hand the fees could also decrease significantly. According to some estimates, ETH is in any case destined to become a deflationary cryptocurrency as early as next year, but much will depend on its actual use once PoS is introduced.
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