An Ethereum network update that removes transaction fees from circulation instead than delivering them to miners has already burnt just over $400 million dollars in ETH. Approximately 200 ETH ($643,000) every hour is being burned.
The milestone was reached at about 10am UTC on Sunday, when the Ethereum network took 124,865 ETH out of circulation. The ETH-1559 upgrade came into effect on 5 August. The upgrade is one of the phases of Ethereum 2.0. It attempts to stabilize the fluctuating transaction costs of Ethereum and accelerate the transition to Ethereum 2.0, the Ethereum blockchain’s next generation.
A Huge Amount of Ethereum Taken out of Circulation
Since EIP-1559 came into effect, the largest day of ETH burning occurred when the network removed 11,176 ETH from circulation (US$ 35,8 million) on August 27. The heavy-duty day corresponded with hefty transaction fees at an average of $38.3, mostly occurring on decentralized exchanges like Uniswap and the NFT trading platform Opensea.
Ethereum, like Bitcoin, presently utilizes an energy-intensive “mining” method to generate new cryptocurrencies and distribute them. Ethereum is poised to upgrade to a greener blockchain consensus model with EIP-1559 and the change to the proof of stake.
Goals of EIP-1559
Ethereum Improvement Proposal (EIP) is an approach that is based on Bitcoin Improvement Proposals to propose enhancements to the Ethereum Network (BIPs). An EIP is a design document including the technical specifics of the proposed change as well as the reasons for the change.
In order to deal with a variety of user experience issues, EIP 1559, known as ‘burning fees,’ reverses the sequencing of a traditional blockchain transaction. EIP 1559 A user usually pays a gas fee to a miner for a transaction which is included in a block.
The gas charge will now be sent to the grid as a kind of “burn” called base fee, with an optional tip for miners. The burning fee is also decided by an algorithm, which is supposed to make it easier for consumers to pay a fair amount.
The EIP aims to improve the predictability of transaction costs, not to decrease them. EIP-1559 may result in a reduction in gas prices as a side effect of a more predictable base charge if fee projection means that customers are less likely to overpay gas.
After blocks are occupied by more than 50 percent, the basic costs with EIP-1559 will increase and fall by 12.5 percent. For instance, if a block is 100% complete, the basic cost increases by 12.5%; if it is 50% complete, the basic price will stay the same; and if it is 0% complete, the basic cost decrease by 12.5%.