Ethereum’s EIP-1559 Implementation Leads to $11B Worth ETH Burn, Exceeds Market Cap of Crypto Assets Outside Top 10
In Brief
$11 Billion worth of ETH was burned after Ethereum introduced EIP-155, surpassing market cap of crypto assets outside of the top 10.
Since the implementation of Ethereum Improvement Proposal EIP-1559 in 2021, which aimed at altering the calculation and processing of network transaction fees on the Ethereum blockchain (ETH), approximately $11 billion worth of ETH has been burned. According to Sassal, the founder of an Ethereum transaction fee tracking platform, The Daily Gwei, when stablecoins and stETH are excluded from the top 10 cryptoassets by market capitalization, the dollar value of burned ETH surpasses the market capitalization of every individual cryptoasset outside of the top 10.
Meanwhile, following the implementation of the Merge in 2022, which completed Ethereum‘s transition to a proof-of-stake (PoS) consensus mechanism, there has been an issuance of 1,047,643 ETH ($3.05 billion) and a burning, or removal from circulation, of 1,407,200 ETH. This has resulted in a net supply reduction of 359,557 ETH, equivalent to 0.209% year-on-year.
The reduction signifies a deflationary trend resulting from Ethereum’s practice of burning a portion of transaction fees paid to validators. Thus, the implementation of the Merge replaced miners with validators, removing a significant portion of ETH supply from the market.
Ethereum’s Robust Performance
The second-largest cryptocurrency by market value, Ethereum, has demonstrated a stronger performance over the past week, with analysts suggesting that this upward trend may continue.
ETH has experienced a gain of over 16% within the past seven days, reaching a level above $2,900, marking its highest point in nearly two years. In contrast, the Bitcoin price exhibited a more moderate increase of 8.5%, reaching $52,300, according to data from CoinMarketCap.
While significant discussion surrounds the anticipated Bitcoin halving in April, the ongoing reduction in ETH supply since September 2022 is equally noteworthy. Despite the low ETH/BTC ratio, there is active demand for Ethereum, and its fundamental supply outlook appears even more favourable than that of Bitcoin, according to Greg Magadini, Director of Derivatives at Amberdata.
The significant reduction in ETH supply, coupled with other dominant factors such as the upcoming spot Ethereum ETF later this year, may indicate that the current supply narrative for ETH is as positive as possible, suggesting a promising performance for Ethereum in the near future.
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
