Due to the implementation of a new transaction fee mechanism by Ethereum developers, costs were reduced for all transactions. Since that modification, $30 million of Ether has been burned.
OpenSea tops the scoreboard of Ethereum gas burners in terms of NFT projects, while NFT marketplace tops the leaderboard of Ethereum marketplace apps.
Burn, Baby, Burn
Since two days ago, EIP-1559, a new fee-burning mechanism for Ethereum, has removed $30 million in ETH from the network’s circulation. One of five upgrades (which is collectively known as the “London hard fork”) that took place on August 5th and are now included into Ethereum was a new mechanism known as EIP-1559, which replaced the previous Ethereum transaction fee mechanism with a different computational method.
Ethereum users won’t get transaction fees any more unless they deliberately decide to “tip” miners. Instead, the fees are used to reduce the overall number of ether in circulation.
NFT Trades Leading the Way in Burns
According to statistics on the Ethereum-Tracker Ultrasound.money, over 1,000 ETH ($3.8 million) of Ethereum has been burnt thus far, with the majority coming from trades on the NFT marketplace OpenSea.
The second most-used ETH burner is Uniswap V2, which has burnt 810 ETH ($2 million) as of April 2017.
The third project is Axie Infinity, a DApp built on Ethereum which uses NFTs (non-fungible tokens) to trade virtual monsters and pits them against one other. Axie Infinity has burnt 626 ETH, which costs about $1.9 million.
How Does EIP-1559 Work?
These two key components serve as the backbone of the Ethereum Improvement Proposal. Also known as the “Base Fee,” the base fee is a minimum gas price needed for transactions, which regulates transaction costs when the market is active and lowers transaction fees when the market is calm.
With this new version, miners will no longer determine the fees; instead, the network will use an algorithm to distribute fees more consistently throughout the Ethereum ecosystem. In addition, the network will not collect transaction fees but will instead use the mining process to directly decrease the total number of available ETH.
With the new inclusion fee proposal (EIP-1559), you will be able to pay miners for prioritizing your transaction above others on the network. In essence, inclusion fees do away with transaction fees, becoming an additional revenue stream for miners.
The goal of EIP-1559 is to minimize price volatility with gas costs, but it does not guarantee lower pricing—because the number of transactions that can be processed by Ethereum is fixed. To provide more stability and predictability, under EIP-1559, transaction fees may only rise or decrease by 1.125x per block.