Ethereum transactions fees have been burnt since the launch of EIP-1559, which has resulted in over 200,000 ETH (about $675 million) being removed from Ethereum’s circulation.
$1.2 million in ETH, or 300 ETH, is destroyed per hour at current prices. On Friday, the network burnt 13,839 ETH and 10,675 ETH was taken out of circulation on Monday.
Ethereum’s EIP Process
Ethereum, like Bitcoin, relies on a resource-intensive mining process to create new money. To clean up its act, Ethereum has adopted EIP-1559 and make the jump to proof of stake.
Ethereum Improvement Proposal (EIP) is a process that enables improvements to the network. A technical proposal for a change is prepared as a technical paper and is accompanied by comprehensive technical documentation.
A popular update known as “burning fees” (EIP 1559) revamps blockchain transaction processes to address a variety of user experience issues. The transaction fee that a miner receives and is attached to a block.
Blockchain transactions will include a transaction fee, referred to as gas, that miners may be given a tip on. A process was created to ensure consumers pay a fair fee for the usage of the network.
Ethereum’s Shift Towards Token Burning
The aim of the EIP is to minimize transaction fees by ensuring they are more predictable, not to reduce them. A shift in gas pricing is possible because to the implementation of EIP-1559, which could reduce gas costs since a more accurate base fee would mean that customers are less likely to overpay.
EIP-1559 will increase and decrease the cost of basic expenditures by 12.5% after half of the blocks are taken. A fully finished 100% block will cost 12.5% more than a partially completed block of the same size, and it will stay unchanged if just 25% done, but it will cost 12.5% less if it is unfinished.
Currently, a single swap on Uniswap is $76.31, while a transfer of an ERC-20 token is $24.8. The most wasteful Ethereum network gas user is OpenSea NFT market, which accounts for 11.65% of all gas consumption in the last 3 hours and 15% of all gas use in the past day.
While this means that Ethereum users are on average dropping a lot of money on gas, they have the added benefit of burning on their side. As more Ethereum gets taken out of circulation, the more scarce ETH, as an asset, becomes.