Ethereum Burns Over Half of All ETH Issued: Ultra Sound Money
Over two years since Ethereum merged its proof-of-work layer with the proof-of-stake Beacon Chain, the network has burned over 3.5 million ETH out of the over 6.5 million ETH published. This amounts to a decrease in supply by approximately 0.98% annually. Ethereum’s goal is to become a deflationary asset, where the coin burning rate exceeds issuance. Although this ideal hasn’t been fully achieved, Ethereum has been moving closer to it since the merge in September 2021.
Ethereum’s Path To Becoming Deflationary
Ethereum currently has a total supply of over 120.2 million ETH, with around 580,000 ETH being issued annually. The objective is for the network to burn more ETH than it produces, transforming it into a deflationary asset. This concept is highly valued by Ethereum enthusiasts as “ultra sound money.”
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ETH Transfers, OpenSea, Uniswap Are Big Contributors
The majority of Ethereum’s coin burning comes from ETH transfers, but significant burns also occur from smart contract activities. Platforms like OpenSea and Uniswap drive burning activity, along with transfers of ERC-20 USDT. Ethereum started burning gas fees after the activation of the London hard fork, which implemented the Ethereum Improvement Proposal (EIP)-1559 to enhance transaction flow.
Ethereum’s Coin Burning and Gas Fees
Ethereum’s coin burning is part of its efforts to improve scalability and transaction efficiency. The base fee for transactions introduced in the London hard fork shifted Ethereum from the previous bidding approach, ensuring any transaction can be included in the next block. However, gas fees on the network remain some of the highest in the crypto sphere.
Hot Take: Ethereum’s Active Coin Burning Supports Its Path to Deflation
Ethereum’s ongoing coin burning is a significant step toward achieving its goal of becoming a deflationary asset. By actively decreasing the supply of ETH, Ethereum is moving closer to the concept of “ultra sound money” endorsed by its community. The coin burning is driven by various factors, including ETH transfers, smart contract activities, and gas fees. While Ethereum still has work to do to fully realize its deflationary objective, its progress so far is promising for crypto enthusiasts and investors.
