Amidst Ethereum’s deflationary shock, gas fees reach startling levels

ETH

The launch of NFT Virtual Title Deeds for Bored Ape Yacht Club-based Yuga Labs’ Otherside remained the biggest NFT drop to date. It grossed over $900 million in total sales volume as a roaring crowd of people showed interest.

Likewise, the frenzied attempt by approved buyers to snap up the valuable NFTs drove up the Ethereum network’s gas fees to startling levels.

Burning like fire

According to IntoTheBlock’s Lucas Outumuro, “The Bored Ape’s Otherside land sale resulted in more fees processed by Ethereum in three hours than in the previous two weeks.”

The gas prices across the network went through the roof. Many transactions failed which caused people to lose their gas fees, and others just couldn’t afford to mint the NFT lands.

The Ethereum network pocketed around $125 million in gas costs alone after the event. It also highlighted some censorship among users given the rising fees.

On the other hand, Ethereum is projected to become deflationary later this year. The much-anticipated ‘Merge’ would decrease ETH’s issuance by 90%, leading to more ETH burned than ‘printed.’

Well, the process had already begun. At press time, the amount of ETH burned has reached an all-time high. If annualized, this would equate to an 18% supply reduction, as shown in the chart below.

This effectively means that the Ethereum network has undergone a massive deflationary shock, providing another example of the popular meme “ultra-sound money.”

A total of 2.3 million ETH, worth around $6.4 billion, burned, resulting in a net reduction of 62.2% in ETH in circulation, according to the dashboard. Watch the Burn.

It’s part of a multifaceted strategy to upgrade the blockchain network to its Consensus Layer, previously known as Ethereum 2.0. Also reducing the amount of money that crypto miners can make from each transaction.

The decrease here leads to…

Another EIP-1559 change would be the amount of Ethereum available on exchanges.

Ether’s supply became 1.6% lower than what it would’ve been without the hard fork. This is a sign of a significant fall in its circulating supply. In addition, traders removed their Ether from centralized exchanges and shifted into Defi smart contracts. Data from Glassnode showed that the number of ETH stored on exchanges continues to fall as we speak.

admin

Read Previous

1.12 Billion ADA Return to Circulation as Price Hints at Incoming Volatility

Read Next

Yuga Labs Highlight Everything That is Wrong in the NFT Space

Leave a Reply

Your email address will not be published. Required fields are marked *

Right Menu Icon