Since its launch in August 2021, EIP-1559, Ethereum’s well-known fee burning proposal, has removed 2 million ETH from circulation. The “merge” to Proof-of-Stake is Ethereum’s next big development.
EIP-1559 Burns Millions of ETH
Ethereum continues to burn ETH. According to data from ultrasound.money, the most popular smart contract network burned 2 million ETH today.
Due to a fee burning proposal known as EIP-1559, the whole ETH supply has been under deflationary pressure since Ethereum’s London hardfork in August 2021. It established a method that burns a portion of the gas fee with every Ethereum transaction, making it Ethereum’s most popular update to date.
EIP-1559 was created to fix Ethereum’s fee market, which previously relied on an auction system, making transaction fees unpredictably high. With EIP-1559, Ethereum users pay a base charge, which is a low fee for transactions. They can provide miners an optional tip to speed up their transaction during instances of significant congestion. It also puts downward pressure on the price of ETH, reducing supply over time.
At the moment, Ethereum burns just over 6 ETH every minute. A considerable chunk of that consumes by OpenSea, the world’s largest NFT marketplace. While Uniswap was formerly the network’s biggest gas guzzler, a surge in the NFT market has pushed OpenSea to the top. Transfers of ETH came in second, ahead of Uniswap transactions.
The long-awaited move is Ethereum’s next major protocol modification after the London hardfork. The consensus process will switch from Proof-of-Work to Proof-of-Stake. “The merge,” as the update is known, a common term. The consensus layer of the blockchain (also known as the Beacon Chain) integrates with the execution layer (Ethereum mainnet).
This week, as Ethereum successfully conducted a rehearsal of the event on the Kiln testnet, excitement for the merge has grown. Despite the fact that Tim Beiko of the Ethereum Foundation reported that one client failed to generate blocks during the test.
Fans of the top smart contract network, on the other hand, had been counting down to the merger since last week. The transition to Proof-of-Stake expects to be one of the most significant developments in blockchain history. It will implement a significant protocol update that will reward ETH stakers rather than miners. Additionally, Ethereum anticipates to become 99.95% more energy efficient. This is something that both the crypto community and the general public should be happy about.
Downside of the Merge
Importantly, after the merger takes place, ETH emissions will considerably reduce. The yearly inflation of the ETH supply is now at 4.5 percent to pay miners, but with Proof-of-Stake, the annual emission expects to be closer to 1%.
EIP-1559 burns 6 ETH per minute on a regular basis. It’s possible that the quantity of ETH burned will exceed the amount paid out in block rewards to validators. ETH would then become a deflationary asset at that point.
The merger tentatively schedules for June 2022, but the actual date has yet to determine.