The most significant improvement in the ‘ Ethereum London Hardfork,’ EIP-1559, introduced a transaction fee burning mechanism with the intention to restructure processing fees on the platform.
In the new structure, users pay a base fee. This base is burnt each time its paid removing it from circulation.
In the first 24 hours since the upgrade, the network reportedly burned 4,600 ETH, which was approximately $12 million.
According to latest statistics, about 3.25 ETH is getting burned every minute.
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SEE ALSO: Making ETH a Deflationary Currency with the Upcoming Ethereum ‘London Hard Fork’
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Tim Beiko, an Ethereum core developer who took on a leading role in the implementation of 1559, has indicated that the base fee is expected to account for anywhere between 25-75% of the total transaction fee.
According to stats, the total amount of ETH burnt since the upgrade went live stands at roughly 60, 000 ETH as of mid-August 2021.
The top platforms on the burn leaderboard are:
- OpenSea – 428 ETH burned
- UniSwap V2 – 326 ETH burned
- Tether – 245 ETH burned
- Axie Infinity – 227 ETH burned
- Audioglyphs – 157 ETH burned
The burning however has not yet made ETH a deflationary currency, (one whose total supply decreases with more tokens issued) and it remains to be seen whether such a situation would be possible with EIP-1559.
ETH won’t immediately become deflationary because the proof of work mining will continue producing net inflation until Ethereum switches to proof-of-stake later in 2021, says developer Ryan Berckmans, a strategy and engineering consultant at Ethereum.
According to Ryan, inflation will likely turn negative when Ethereum 2.0 is finally rolled out.
Tim Roughgarden, an American computer scientist and a Professor of Computer Science at Columbia University, has indicated that what EIP-1559 should do is:
- Decrease the variance in transaction fees and the delays that some users experience through the flexibility of variable-size blocks
- Improve the user experience through easy fee estimation in the form of an ‘obvious optimal bid,’ outside of periods of rapidly increasing demand
- At least modestly decrease the rate of ETH inflation through the burning of transaction fees
Not everyone agrees with these predictions however, with some arguing that Ethereum could become deflationary even before PoS.
Some analysts also suspect that Ethereum might not reach the level of traffic whereby token burns outpace inflation.
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RECOMMENDED READING: Understanding Ethereum 2.0 and Why It Matters
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