Ethereum Is On Course To Become Deflationary

2000 Ethereum Burned Daily As Network Seeks To Reduce Fees.

So far the Ethereum network has burned 1.97M ETH worth $5.4 billion after a move implemented to reduce the high fees on the network. The burning mechanism that was introduced on August 5, last year now puts 2000 coins out of circulation daily.

The implementation is meant to help the network reduce its fees considering that most decentralized apps are hosted on the platform.

According to data available, the burning process has not been accompanied by spikes in the price of the token which is an indication that the market is increasingly adapting to the process.

With very high transaction fees unlike what is obtainable on other networks, the burning of ETH tokens was increased with the high demand for NFTs and DeFi platforms built on the network. At its peak, users sometimes paid more than $50 as transaction fees on the Ethereum network due to congestion.

The network has been working to control fees by issuing fewer tokens during periods of high service demands on its platform. WatchTheBurn, a network analysis platform showed this in charts available on the platform.

The conclusion of the analysts is that the objective of the burning, which is fees reduction, is being accomplished. This considers the fact that gas fees of 18 Gwei are now required to make transactions on the network unlike what was obtainable in the last few weeks when demand for gas for transactions was 50-60 Gwei.

BY continuous burning of Ethereum, the asset is becoming deflationary, i.e slowly but gradually ETH is reaching a stage where more ETH would be burned daily than mined. As supply is gradually decreasing on daily basis, rising demand will help ETH price increase.

There was a 67% reduction in issuance of ETH tokens since the past week, with 66,914 ETH or the equivalent of $184 million worth of the token issued. Investors are yet to see the effect of the burning since there has been no significant rise in ETH prices.