Just over three months ago, the Ethereum network rolled out a London Hard Fork update. This update indicates a transformation for the blockchain.
By laying the groundwork for the “proof-of-work” mining system, the developers were hoping that not only would the upgrade make the network more environmentally friendly. But it would also potentially reduce the gas fees.
According to the research firm Dune Analytics, over the past 111 days, the network has burned over one million Ethereum. That is worth about $3.8 billion. It is based on Ether’s price at Indian Standard Time (IST) at 11:30 on November the 26th. However, it still has not achieved its desired result yet.
How “burning” in Cryptocurrency Works
With the EIP-1559 update, which is part of the London Hard Fork, a small amount of ether permanently detaches from the network with a done transaction.
This is the “base fee.” The demand on the Ethereum network does not affect this rate. It addresses an important question about the supply of Ethereum and its value.
While the Bitcoin network says there will only ever be twenty-one million Bitcoins, it creates an artificial rarity. Ethereum, however, has an unlimited supply and this new upgrade introduces an element of scarcity to the network. It also helps reduce the gas fee to some extent. Since users can pay only the base fee for a transaction if they want.
Faster transactions can be by paying a “priority fee” to miners, based on the demand of the Ethereum network.
Issues on Gass Fees
ETH transactions still require paid high gas fees. Which was visible in the failure of the Constitution DAO recently.
The crypto internet came together to form a Decentralized Autonomous Organization (DAO). It pooled in $47 million to win an auction. They lost. Though the donors of the DAO have their donations refunded, they will lose the gas fees they paid to form the DAO—248 ETH.
A DAO is an organization that forms using smart contracts. Instead of a board of directors or individuals, all the rules code into smart contracts, and changes can only be made if a majority of the members of the DAO agree.
As reported by Bitcoin.com, there is about 118 million Ether in supply today, and non-fungible token (NFT) marketplace Open Sea are responsible for the most ETH burned so far — 110,081.
With more blockchain-based games and other metaverse projects built over Ethereum, reducing the gas fee is central to scaling the platform.
