Over the last 24 hours, more Ethereum has been burned on the network than has been coined, implying that there is less Ethereum accessible today than there was yesterday. This, according to Ethereum researchers, is a first for the network.
EIP-1559 was implemented to Ethereum last month to slow the rate at which the ETH supply rises. However, the supply of ETH has not increased in the recent 24 hours. It’s getting smaller.
EIP-1559 was a proposed coding update to the Ethereum blockchain that would allow block sizes to be increased, allowing the network to handle more transactions.
The popularity of NFTs and decentralized finance apps like loan protocol Aave and exchange Uniswap has caused congestion on the Ethereum network, as these tools consume the network’s finite resources.
A requirement for a base fee for each transaction was part of the plan. The base fee would be burned (i.e., removed out of circulation by being delivered to a wallet that can’t be accessed) instead of continuing to flow to the miners who validate network transactions.
The goal was to lower the total supply of ETH, which, unlike Bitcoin, does not have an end date. As a result, Ethereum’s price should theoretically climb to keep up with demand.
While EIP-1559 slows the growth of ETH supply, it does not necessarily diminish the amount of ETH available. That’s because miners keep the newly mined ETH with each block they produce. The overall quantity of ETH grows as long as the number of newly mined ETH exceeds the number of base fees burned.
The supply growth went negative over 24 hours on Thursday and Friday. More ETH was burnt than the 12,500-13,000 ETH that miners were given. This can happen when the base charge for Ethereum transactions adjusts upward during periods of higher demand.
Scott Lewis, co-creator of DeFi Pulse, and Evan Van Ness, founder of Week in Ethereum News, believe this is the first time Ethereum has gone deflationary.
According to the EIP-1559 tracking website Ultrasound Money, almost 188,000 ETH has been burned since the code update went into effect on August 5. That’s the equivalent of $736 million, according to Nomics’ pricing.
The currency’s price has risen as a result of the adjustment. Ethereum has risen 56 percent in one month, from $2,516 on August 4 to $3,926 today.
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