Ethereum supply slipped briefly into deflation: gas fees rise sharply

The theoretical deflation caused by the London upgrade at Ethereum last week actually became visible on the blockchain for a short time. Almost 800 “deflationary blocs” were created.

A spike in the burn rate of Ethereum transaction fees has caused the offering to be deflationary for at least two hours. The network has been in heavy use for the past few days. As a result, a lot more gas was burned.

From 10:00 p.m. UTC, the ETH Burn Bot briefly recorded a burn rate of 545 ethers (ETH) per hour. At 532 ETH per hour spent, the asset had a deflation of -13 ETH for that short period of time.

A few hours later, the ETH Burn Bot recorded a major deflationary fire and burned 945 tokens within an hour. This temporarily led to a negative output of -417 ETH. An annualized deflation rate of -3.12 percent was calculated from this.

$ 945.1184 ETH burned last hour.

Edition: 528.0000 ETH
Net change: -417.1184 ETH
Annualized: -3.12%

2021-08-10 22: 00-23: 00 UTC
Last block: 13000300
Cumulative: 24,942,1282 ETH

– ETH Burn Bot (@ethburnbot) August 10, 2021

If the amount of ETH burned exceeds the mining reward, deflationary blocks will be produced and the supply will temporarily decrease. That was observed on a tracker from consulting firm Carbono, which has recorded 791 deflationary blocks to date. These are defined as blocks where the burned fee exceeded the number of ETH dismantled.

Number of deflationary ETH blocks. Source: Carbono

When the London Hard Fork was implemented on Thursday, it presented the highly anticipated Ethereum Improvement Proposal 1559. This improvement suggestion should adjust the calculation of the transaction fees. As part of this adaptation, mechanisms were introduced that burn off some of the base charges.

According to ultraschall.money, which tracks the coins burned, 25,600 ETH had been burned by the editorial deadline. According to current exchange rates, this corresponds to around 80 million US dollars in just under a week.

The Ethereum economy is not expected to experience prolonged deflation. This won’t be the case until fee burning is combined with reducing block reward spending. This completes the transition to the proof-of-stake.

In this context: The Ethereum network burns 395,000 ETH per hour after the London upgrade

For Ethereum users, however, the news isn’t all good as gas prices have risen again. According to BitInfoCharts, the average transaction price rose from around $ 4 to $ 20 in late July. Etherscan’s gastracker priced up to $ 28.60 for a token swap on Uniswap.

The surge in demand for Ethereum block spaces was fueled by non-fungible tokens. Gala Games’ OpenSea marketplace, Vox and Axie Infinity are in the top 4 when it comes to gas combustion. A total of 2,200 ETH or $ 7 million has been burned so far.

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