EIP-1559 burned 2 million Ethereum.

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Ethereum burned 2 million ETH through EIP-1559. Blockchain's next protocol upgrade is the “unification” from proof-of-work to proof-of-stake. Due to the effects of EIP-1559 and the reduced emissions from converting to proof of stake, ETH may soon become a depreciating asset.

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Ethereum's next major upgrade is its “integration” into proof-of-stake.

EIP-1559 will burn 2M ETH

Ethereum will continue to burn ETH.

According to data from ultrasound.money, the number one smart contract network burned 2 million ETH today. Since Ethereum launched its London hardfork in August 2021, the entire supply of ETH has been under pressure from a fee-burning proposal called EIP-1559. Ethereum's most popular update to date, EIP-1559, introduced a mechanism that burns a certain amount of gas fees with each Ethereum transaction. EIP-1559 is designed to fix the Ethereum payment market because Ethereum gas payments have previously adopted an auction system, making transaction costs unpredictable. With EIP-1559, Ethereum users will pay a lower fee for transactions, known as the “base fee”, and can add optional tips to miners to get their transactions faster in times of high congestion. EIP-1559 also adds false pressure on ETH and reduces its supply over time.

At ultrasound.money, Ethereum currently burns over 6 ETH per minute. A big chunk of that is consumed by OpenSea, the world's largest NFT marketplace. While Uniswap was previously the largest gas sink in the network, growth in the NFT market has pushed OpenSea to the top spot, with ETH transfers taking second place ahead of Uniswap transactions.

Ethereum prepares for integration.

After the London hardfork, Ethereum's next major protocol upgrade is the long-awaited transition from proof-of-work to proof-of-stake consensus mechanism. The update, popularly called the “merger,” merges the blockchain's consensus layer (otherwise known as the beacon chain) with the execution layer (Ethereum mainnet).

Ethereum is building anticipation for the merger this week as it successfully completes its event training on the Killeen testnet (although Ethereum Foundation's Tim Beiko reports that one customer Couldn't produce blocks during the race). However, fans of the advanced smart contract network were counting on the merger before this week; The transition to proof-of-stake is expected to be one of the biggest events in blockchain history. In addition to introducing a key protocol change to pay ETH stakeholders instead of miners, Ethereum is expected to be 99.95% more energy efficient.

Crucially, once the merger takes place, ETH emissions will be greatly reduced. The supply of ETH is currently covered by 4.5% annually to pay miners, but with proof of stake, the annual release is expected to be closer to 1%. As EIP-1559 normally burns 6 ETH per minute, it is estimated that the amount of ETH burned may exceed the amount awarded to validators. At that time, ETH will become a depreciated value.

Although the launch date is yet to be confirmed, the merger is tentatively scheduled to take place in June 2022.

Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.

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