According to research, implementing token burn has caused the second-largest crypto by market cap, ETH average gas fees, to fall again by around 15-20 Gwei in December 2022. Since the implementation of the token burn mechanism on Aug 5, 2021, $9 billion worth of ETH has been burned.
Glassnode data indicates $9 billion worth of ETH has been burned
According to a report published by ultrasound.money, it has been figured out that a total of 2.8 million ETH tokens have been removed from the supply since the burn mechanism was installed.
This is a chart published by Glassnode, where the blue reflects the daily ETH supply burned at the spot price, while the red stands for the cumulative value of ETH burned over time. An analysis of the Glassnode data by CryptoSlate suggests that ETH’s burn rate has decreased significantly and nearly stagnated since the collapse of Terra-Luna in May 2022.
When the crypto market saw a bull run in 2021, 20 million USD to 75 million USD worth of ETH was burned down from the server daily. This has now fallen to 2 to 4 million USD worth of ETH burned every day in Dec 2022.
According to ultrasound.money, 1896.30 ETH, worth around 2.2 million USD, was burned over the past day from the supply chain. You have to understand that the fall in the daily burn rate of ETH directly reflects the fall in the ETH activity amid the current bear market.
Importance of ETH burn
Burning of tokens refers to transferring tokens to addresses from which the tokens become irretrievable. Burning the tokens reduces the assets circulating supply and contracts overall supply over time. The burning mechanism aims to regulate the ETH gas fees- the fees paid for carrying out the transaction on ETH.
Before the burn mechanism, ETH users had to guess the fee they had to pay for their transactions included in the blockchain. This caused high volatility in the ETH gas fees, especially during high network congestion.
When millions of users complained about steep gas fees, the ETH network incorporated the token burn mechanism with the EIP 1559 upgrade. With these, the users must pay a base fee and a tip similar to what we do for our deliveries. This has been very helpful for crypto traders and investors.
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