According to the latest on-chain data, more than 1 million Ether coins, worth the equivalent of $4.24 billion, have been burned since IP-1559 officially went live in August. However, ether is still inflationary at around 1% a year, but that will change next year with the upcoming Ethereum 2.0/1.0 merger.
More than 1 million Ethereum coins, worth $4.24 billion, have been burned since the London hard fork upgrade was completed and IP-1559 was officially launched in August, according to data released by cryptorank, a blockchain research institution on Thursday.
As previously reported, proposal EIP-1559 aims to reduce the amount of ETH in circulation by changing the existing fee structure for ethereum processing, splitting the fee into base fee and miner fee, and destroying part of the base fee.
According to CryptoRank, NFT exchange OpenSea was the most burned (110,237 coins), Second to fifth were ETH Transfers(97,583), Uniswap V2(92,791), Tether(54,104), and Uniswap V3(22,527).
According to Ultra Sound Money, as of press time, about 8.11 Ether coins are being burned every minute, which at the current rate equates to about 4.3 million ether coins being burned every year. However, with 5.4 million ether coins being issued annually, ether is still inflationary, with an annual inflation rate of about 1%.
But all that will change next year. According to Cointelegraph, with the completion of ethereum 2.0 upgrade and the formal transition from proof of Work (PoW) to proof of stake (PoS) consensus, the return on pledging will be much lower than the return on mining.
At that point, the issuance rate of the Ethereum blockchain will be much lower than its burn rate, creating a deflationary ecosystem. Ultra Sound Money estimates that the supply of Ethereum will peak at 119.7 million coins in early 2022 and then begin to decline.
Ethereum merger
As previously reported, ethereum 2.0 and 1.0 are expected to merge in the second quarter of next year. Trenton Van Epps, the ecological construction coordinator of the Ethereum Foundation, said on The 17th that his personal estimate is that Ethereum will end the PoW consensus mechanism in 3 to 6 months, and called on Ethereum miners to prepare for it.
No official date has been set for the merger, but when interviewed by Tim Beiko, a core Ethereum developer, and Ben Edgington, a researcher at Conen Sys and product lead for Teku, an Ethereum 2.0 client, both emphasized the fact that Ethereum developers are currently focused on the last leg of ethereum 2.0.
Ben Edgington points out that after the merger is completed, the total supply of Ether is likely to shrink for the foreseeable future as the number of Ether coins issued per block on Ethereum will be reduced to 2 due to the removal of mining incentives and IP-1559 will continue to burn ether.
Viktor Bunin, blockchain protocol expert at U.S. cryptocurrency exchange Coinbase, also said that since the implementation of IP-1559, the net issuance of Ether has decreased by 66%. If the merger were to take place today, the net issuance of Ether would actually be negative, making Ether deflationary. The key to IP-1559 and running the validation node is to make ether, an asset, more useful, which until now had only indirectly benefited from the benefits of Ethereum. Having directly measurable metrics will help industry participants understand the value and utility of owning and using Ether.