In the first week of August, Ethereum’s long-awaited update EIP-1559 finally came into effect. An upgrade that the broad market had been waiting for for a long time. And so far, the mechanism for charge incineration introduced with this upgrade has been working smoothly. Over 3 ETH per minute were burned in the past 24 hours.
Now that the network is running smoothly, what effects has the upgrade had on the network so far? Considerable. EIP-1559 has brought about some noticeable changes in the network. This ranges from the price of the token to the way in which transactions are carried out. And even down to the question of how much miners are paid per block for their mining activities.
Reduced ETH offer
A noticeable change in the network is the lower supply of coins. The number of ETH burned so far has currently (at the time of this article) exceeded 33,000. Normally, this amount of tokens would have been in circulation – via the ETH, which is paid to the miners for the blocks they have mined.
This shows the broader market how much ETH the network has brought into circulation through mining: over 33,000 ETH in one week.
The token burns are essentially coins that are sent to addresses with private keys that cannot be accessed. The network removes the coins that were sent to these addresses from circulation forever. Now a third of the ETH gained through mining that would have been brought to market is no longer in circulation. This corresponds to around 30% of total net sales.
Deflationary development of Ethereum
Although the entire network is not yet fully deflationary, there have been instances when blocks have become deflationary. In some cases, fee pressure under EIP-1559 has resulted in ETH burned being higher than the two ETH spent per block minted on the Ethereum network. This has only happened a few times – but it shows that Ethereum has the potential to become deflationary in the long term.
This reduced supply will result in a higher value on Ethereum. ETH investors will see higher value in the asset as there may be more demand in the market than supply. This, in turn, leads to a shortage of the asset that causes the price to skyrocket.
The price of the digital asset has maintained its upward momentum for most of the week and is currently trading at $ 3,163.
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