Ethereum has posted its first consecutive week of deflationary issuance amid surging network activity, meaning more ETH was destroyed than created over the past seven days.
More than 1.5M Ether has now been burned since EIP-1559 introduced Ethereum’s burn mechanism in early August. Nearly $5B worth of ETH has been destroyed in less than six months. Ethereum’s issuance rate also recently dropped below that of Bitcoin for the first time.
The milestone bodes well for Ethereum’s coming 2.0 roadmap. The Merge is expected to drive a further 90% reduction in ETH issuance with the introduction of Proof-of-Stake consensus, putting an end to block rewards for Proof-of-Work miners.
According to Ethereum data aggregator Watch The Burn, 5,910 more ETH were destroyed than created between Jan. 11 and Jan. 18, equating to a net weekly issuance offset of $18.8M. The weekly issuance offset was roughly 15,500 ETH or $51.M as of Jan. 17.
Data provider Ultrasound Money estimates more than 100,300 ETH were destroyed over just the past week at a rate of 10 ETH every minute. OpenSea was the largest burner destroying 17,625 ETH, followed by ETH transfers with 9,599 ETH, and Uniswap v3 with 6,249 ETH.
An average of 6.47 ETH have been burned every minute since EIP-1559 went live.
Twitter user “CryptoGucci” commented on the significant reduction in ETH issuance, estimating that Ethereum’s inflation is down nearly 70% since 1559 went live. “Once The Merge is here in July, ETH Issuance will drop 90% and turn fully deflationary,” they added.
Although not everyone is convinced that deflationary issuance will benefit all of Ethereum’s network participants.
“Am I the only one concerned about #Ethereum becoming #deflationary?” posted Brian Sgeth. “If you’re an #investor this seems good for returns, but if you are a user though, this doesn’t seem ideal.”
Polygon followed in Ethereum’s footsteps by forking to introduce EIP-1559 on Jan. 18, meaning a base fee denominated in its native MATIC token will now be burned with every transaction executed by the network.
The newly launched burn mechanism will result in deflationary issuance as MATIC has a fixed supply. The Polygon team predicts 0.27% of the MATIC supply will be destroyed over the next 12 months based on current network activity.
Binance launched an automated protocol to manage its quarterly BNB burns last month, doing away its old burn system based on revenue. The protocol was used for the first time on Jan. 17, destroying more than 1.68M BNB (worth nearly $780M at current prices) in BNB’s 18th burn event.