The Ethereum blockchain is burning through millions of dollars worth of crypto in record time. Around 2.35 million Ether (worth $8.10 billion) has been burned since the implementation of the Ethereum Improvement Proposal (EIP) 1559. The last seven days have seen 18,110 ether worth $34.9 million destroyed – a sign that there would be scarcity.
288 days ago, Ethereum developers implemented a rule change that will forever alter how transactions are executed on their network. The EIP 1559 evolved the algorithm for gas prices and now burns base fees per transaction!
The London upgrade of EIP 1559, which was codified into the codebase on August 5, 2021, and live since then has 2.35 million ether worth $8 billion in USD value destroyed forever so far!
The day after the implementation of EIP 1559, Vitalik Buterin explained that the change brought about by EIP 1559 was "definitely the most important part" in regards to London's upgrades.
Last 24 hours, a whopping $4.63 million worth of ether has been burned! On May 1, the network saw a record-breaking daily burn rate with 71,718 ether worth $138.78 million. On January 10, 2022, the second highest burn rate daily record was set when 19,424 Ethereum worth roughly $37.5 million was destroyed that day.
The most significant Ethereum burner today is Opensea as they've burned 229,925 ether over 14,639,327 transactions. Gas used for the transfer of this cryptocurrency has burned 207,072 ETH and with Uniswap V2, only 131,457 ETH was destroyed in the process.
The next significant shift will be when The Merge is applied. With this update, Ethereum will switch from its current consensus algorithm, which utilizes proof-of-work (PoW), to a more energy-efficient one called proof-of-stake (POS). This change has many benefits, including reduced transaction fees and faster confirmation times!
It seems that Ethereum's believers are getting ready for The Merge as some of its key players suspect this change will be codified at some point in summer. Just recently, Consensys launched an early access version of "Bonsai Tries" which aims to be several steps ahead in the merge transition.
Furthermore, at the recent Permissionless conference, it was announced that Ethereum developer Preston Van Loon believes we may see The merge implemented as soon as August. Ethereum developer Tim Beiko recently predicted that the Merge will likely go live by the third quarter of 2022. He further explained why he "strongly suggests" miners do not invest in more mining rigs going forward, explaining it is too soon for them and their investments may never pay off!
With the looming threat of Proof-of-Work's scaling crunch, Ethereum's mining hashrate has been at an all time high recently. On May 13 a block height of 14,770,231 was mined!
Despite the upcoming changes, Ethereum's PoW hashrate was at the highest point in the network's lifetime on May 13, at block height of 14,770,231.
The idea of burning Ethereum is not new. Many crypto enthusiasts believe that this will give ETH its ultra-sound money feature, where there's a deflationary mechanism in place for when prices drop due to too many coins being issued by developers who want their currency appreciated at a rate higher than inflation rates would allow them so far.
With the merge, Ethereum's supply is set to decrease drastically. Currently at 5 million Ether per year in issuance rates, after the transition, there will only be around 500,000 ether issued annually which could cause prices to increase due to its scarcity.
The merger is set to bring an end to the annual supply growth of 3.7%. After The merge, it's expected that there will be roughly a 0.4% yearly supply growth.
Despite all these, Ethereum's burn rate will be around the same, which means that 900,000 ether is expected to disappear each year. However significant spikes like May 1st's 71,718 ether burned can change estimations significantly.