Well, that didn’t take long.
Less than a month since The Merge, ETH supply has dropped by more than 2,000 digital tokens, according to ultrasound.money.
The mark represents ETH’s first deflationary day since its biggest upgrade went live. And it appears that a mysterious project called XEN Crypto is largely responsible for the spiking transaction fees, and corresponding deflationary pressure on ETH, according to on-chain data.
When many people transact on Ethereum at the same time it drives up gas prices. Parts of the ETH-denominated transaction fees are burned, or permanently taken out of supply, because of another major upgrade, EIP-1559.
XEN’s smart contract accounts for more than 40% of the gas used on Ethereum in the past 24 hours, according to Etherscan.
Not much is known about XEN in DeFi circles. XEN’s website names Jack Levin as its creator. According to the site, Jack Levin was the 21st employee at Google, working on the search behemoth’s cloud network.
He also began mining Bitcoin in 2011 and is the co-founder of ImageShack, a subscription-based image hosting website which raised money from Sequoia Capital, according to Crunchbase.
Levin has kept up a steady stream of retweets about XEN on Twitter since XEN went live less than two days ago.
XEN’s “litepaper” is rather light on details. “XEN aims to become a community-building crypto asset that connects like-minded people together,” reads, going on to highlight what it calls its “unique tokenomics.”
“XEN token’s value is pegged to the difference between world’s inflation vs built-in distribution of the tokens,” the litepaper continues, before delving into mathematics and diagrams.
Some of crypto’s biggest influencers are still trying to understand how the project works.
“I have no idea what this is, but it appears to be instantly mintable and sellable, and has economic value” wrote the well-known trader who goes by 0xSisyphus on Twitter.
This isn’t the only time ETH has been deflationary. An NFT mint for the Bored Ape Yacht Club’s Otherside pushed ETH into deflationary territory in May as minters paid exorbitant fees to get their transactions to execute.
And to be sure, ETH issuance is still up by over 10,000 tokens since the Sept. 15 Merge, meaning there’s a way to go before ETH can be called a deflationary asset. Still, the first deflationary day for ETH since the Merge is certainly cause for celebration for long-term investors in the asset.
Ether has dropped over 25% in the past month, showing the Merge to be the sell-the-news event, some thought it would be.