ETH Destroyed After EIP-1559 Implementation: A Detailed Report

According to reports, according to data from Ultrasound. Money, since the implementation of EIP-1559 in August last year, the total destruction amount of ETH has exceeded 3 million pieces, with the current provisional report of 3031551.91 pieces.

The total destruction amount of ETH exceeded 3 million pieces

The adoption of Ethereum Improvement Proposal (EIP)-1559 was a significant milestone for the Ethereum network. Implementing the EIP-1559 protocol brought various changes in the Ethereum network, particularly in the token supply and reward mechanism. One of the significant changes brought by this proposal was the destruction of some of the transaction fees collected in each block. The burning of ETH tokens has sparked mixed opinions among various stakeholders in the Ethereum ecosystem. In this article, we’ll dive into the numbers behind the ETH destruction and analyze the implications of the same.

Overview of EIP-1559

EIP-1559 is a proposed update for Ethereum that aims to reimagine its transaction pricing mechanism. Before this protocol, Ethereum transactions used a bidding process to determine the transaction fee. It’s worth noting that the transaction fee comprises two parts, the fee paid to the miner and the fee that gets burnt. The amount paid to the miner could vary depending on individual bids. However, the base fee, the minimum amount a sender pays to include their transaction in a block, was previously fixed by miners.
The EIP-1559 proposal introduced base fee burning, which effectively means that the base fee a user pays to the network gets burnt. The burning of fees reduces the overall supply of ETH, which, in theory, could contribute to the coin’s scarcity and price increase.

The Destruction of ETH Tokens

According to reports from Ultrasound, the total amount of ETH destroyed after the EIP-1559 implementation has exceeded 3 million tokens. As of the latest provisional report, the burned amount stands at 3,031,551.91 ETH. This represents approximately 2.59% of the overall circulating supply of ETH.
The rate of destruction has been somewhat steady since the protocol’s implementation nearly a year ago, averaging around 13,600 ETH per day. However, it’s worth noting that the amount destroyed varies based on network usage. During periods of high network congestion, the amount of ETH destroyed tends to be higher since more transactions get processed.

Implications of ETH Destruction

The burning of ETH tokens has several implications for the overall Ethereum ecosystem. Firstly, the destruction of tokens reduces the overall supply, which could contribute to price appreciation. This is because, with fewer tokens in circulation, the remaining ones become rarer, making them more valuable.
Additionally, as we’ve seen, the destruction rate of ETH is inversely proportional to network usage. This implies that Ethereum’s gas fees, which are paid in ETH, could decrease in the long run if more users adopt the network since there would be a larger supply of burned ETH. Lower gas fees could make Ethereum more accessible, especially for smaller users who cannot afford high transaction costs.
However, the EIP-1559 protocol has sparked debates on its long-term sustainability since it reduces the revenue stream for miners who validate transactions on the network. Although transaction fees are substantially reduced during network congestion, miners rely solely on the block rewards they receive for mining new blocks.

Conclusion

It’s evident that EIP-1559 has had a considerable impact on the Ethereum network, specifically regarding the destruction of ETH tokens. While some stakeholders may argue that the destruction of tokens contributes to a more sustainable and valuable network, others may argue that it reduces the overall revenue for network validators. Nonetheless, the adoption of EIP-1559 represents an important step in Ethereum’s evolution, and it’ll be interesting to see how the network adapts to the changes the protocol presents.

FAQs

Q: How does EIP-1559 impact the overall supply of ETH tokens?
A: The protocol introduces the burning of a portion of the transaction fee, reducing the overall supply of ETH tokens.
Q: Could the burning of ETH contribute to the coin’s price increase?
A: Yes, since the burning of ETH reduces the overall supply, it could make the remaining tokens more valuable, contributing to a price increase.
Q: What are the implications of the EIP-1559 protocol?
A: The protocol could contribute to lower gas fees and increase the value of the remaining tokens, but it may reduce the overall revenue stream for miners who validate transactions on the network.