As a massive amount of ETH is being locked in smart contracts, the number of burned coins reaches two million
Nearly $6 billion worth of Ethereum has already been burned while $6 million is taken out of circulation every day. Despite the significant drop in gas fees, the network can still burn a significant amount of Ether, which is enough to halve the net emission.
After implementing the burning mechanism for Ethereum, the supply of the second-largest cryptocurrency reduced to over two million ETH, which at the all-time high of the asset would cost almost $10 billion.
The main reason for implementing EIP-1559, which contained the burning mechanism, was to transfer power from the hands of Ethereum miners to the hands of future validators. The update changed the fee structure and added the concept of “base fee”, which reduced the costs of transactions on the network.
Despite the initial urge to decrease the average cost of transactions, the skyrocketing of the DeFi and NFT industries caused a surge in gas fees, increasing the costs of some transactions to more than $100 in periods of network congestion.
Ethereum becomes deflationary
After the first month of implementing the burn mechanism, the Ethereum network produced the first deflationary block which brought less Ethereum into the hands of users than had been burned at that time.
The deflation of the second-largest cryptocurrency was a long-awaited event on the market, as it would most likely cause an increase in the asset’s value despite the overall decrease of the supply.
Shortly after the implementation of the staking mechanism, Ethereum introduced the Ethereum 2.0 staking contract, which grew in popularity and recently celebrated a milestone of 10 million ETH locked in the contract.
