Ethereum has burned $ 100 million in fees since EIP-1559 went into effect

Soon

  • EIP-1559 created a mechanism to burn Ethereum transaction fees.
  • Since it was implemented through a network upgrade, the price of ETH has increased.

Ethereum fork in London, a highly anticipated network update that included a measure to reduce the growth of ETH supply, went live only last Thursday.

What a difference a week makes.

Since the hard fork, more than $ 100 million in ETH has been burned or withdrawn from circulation, helping drive a price increase from $ 2,725 to $ 3,230, according to data from Nomics.

London update included five code changes, but the most discussed was EIP-1559. ‘Ethereum Enhancement Proposal’ changed the transaction fee structure for the network. Instead of fees going directly to the miners who process and validate transactions, a basic fee would go to the network and be destroyed immediately.

While EIP-1559 was also a way to improve the user experience by automating transaction prices and taking the guesswork out of an opaque auction process, it primarily had the effect of fueling demand by reducing supply.

Time Bitcoin was created with a supply limit of 21 million BTC, Ethereum has no such ceiling. EIP-1559, therefore, inserts a deflationary pressure. With each new block of transactions added to the chain, a new ETH is created and goes to a miner as a reward, but some ETH is removed through fees.

According to the Ultrasound Money website, around 31,000 ETH have already been destroyed. At the current rate, that’s a little over $ 100 million, although it is obviously unknown how much ETH would be worth if those resources weren’t burned.

More than 10% of commissions burned come from transactions on the NFT OpenSea Market, where people can sell or bid on digital art and collectibles. Uniswap decentralized exchange and blockchain-based game Axie Infinity ranks second and third in terms of burn rate.

Those who like to feel the burn are probably waiting for Ethereum to switch from a proof-of-work consensus algorithm to one without a miner. Red play test. Due to Ethereum 2.0, the total supply of ETH may even decrease as more commissions are burned than will be created.

You can almost hear the Ethereum bulls chanting, “Burn, baby, burn.”

Disclaimer

views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.

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