One of the largest hard forks about four weeks ago happened on ETH. With EIP-1559, the network began to deflate by burning tokens on every transaction (theoretically). Still, more tokens were created than destroyed, and the total supply of Ethereum increased.
Although, in the last 24 hours, the burn rate exceeded the minting rate. This implies more Ethereum has been burned than created in the past day, making it deflationary. This may not be sustainable, but as the network grows, we may anticipate it.
The Supply of ETH is Diminishing
Last month, EIP-1559 was added to Ethereum to limit the growth of the ETH supply. But the supply of ETH hasn’t grown in the past 24 hours. It’s Diminishing.
Ethereum’s price has risen sharply in recent days, approaching its all-time high. Now it’s clear why there was such a bullish trend.
The issue is that the network is experiencing increased demand and limited supply, driving up the price. Increased network use also raises the ETH burn rate.
We all know that all fiat currencies suffer from inflation. But Ethereum is now suffering deflation. The market has fewer ETH coins than yesterday, which is extremely strong.
The plan included a base charge for each transaction. The basic fee would be lost instead of going to the miners who verify network transactions.
While EIP-1559 slows ETH supply growth, it does not necessarily decrease ETH supply. Because miners retain the freshly minted ETH with each block generated. The total quantity of ETH grows as long as newly minted ETH exceeds base fees burnt.
According to the EIP-1559 monitoring website Ultrasound.Money, approximately 188,000 ETH has been burnt since the code update on August 5. According to the pricing from Nomics, that’s $736 million.
