NFT and DeFi on the Ethereum network, especially through OpenSea and Uniswap, keep ETH going. In the past week, the price of Ethereum has increased.
As part of EIP 1559, which was launched in August 2021, the protocol has been destroying ETH at a tremendous rate.
According to EIP-1559, a portion of all Ethereum transactions, including NFT trades, yield strategy, and simple token transfers, are destroyed. It is all being burned.
What is the effect of EIP-1559?
Since the implementation of EIP-1559, a grand total of 2.8 million ETH, or approximately $4.6 billion at today’s prices, have been removed from circulation. Ultrasound Money estimates that the Ethereum protocol has destroyed more than 16,364 ETH at a rate of 1.62 ETH per minute over the past week.
This burn mechanism also results in the destruction of more ETH than is issued to miners. Since EIP 1559, supply growth has decreased to -1.06% per year. Thus, Ethereum is more deflationary than Bitcoin, which was heralded as the first sound currency.
The chart below demonstrates how the amount of tokens in the network has changed at different checkpoints and upgrades. The part with the dots shows that the trend of falling prices is likely to continue over the next two years.
what will happen?
The only real reason this prediction would not be fulfilled is if ETH adoption and usage falls off a cliff. Remember that ETH is burned with every network transaction. In the past week, NFT and DeFi activity has been what has kept Ethereum going. This week, almost 8,000 ETH has been lost because of these two categories. The market leaders in each category were the main reasons for this.
This metric provides additional insight into the stablecoin competition between USDT and USDC. Tether’s offering is responsible for more than three times the amount of Ethereum being burned, despite the fact that the former’s market cap is still significantly larger than the latter’s.
This week, USDT transfers burned approximately 705 ETH, while USDC transfers burned only 228 ETH. In other words, USDT remains the most widely adopted stablecoin on Ethereum. As network activity accelerates, the Ethereum community will continue to observe it burn.