Since the launch of the London upgrade from Ethereum on August 5th, more than 297,000 ETH was burned – valued at just over $ 1 billion – according to The Block’s data dashboard.
The upgrade added a new burning mechanism to the transaction fees, with the aim of making them easier to price. To make a transaction, you now pay a base fee that is burned and a priority fee that is effectively a tip for the miner. (A detailed explanation of how fees work now can be found here.)
As a result, Ethereum’s inflation rate has decreased. Miners on the network are producing around 13,000 ETH every day (which are given to them as mining rewards), but the burning mechanism is starting to counter that. On some days, the amount of ETH burned exceeded the amount produced. The net issue is currently around 6,800 ETH.
One reason so much ETH is burned is the prevalence of high transaction fees on the network due to constant demand – along with moments of high demand as we are in the NFT minting season. The number of Ethereum transactions has remained high at 1.2 million transactions per day.
Although second layer solutions like Arbitrum are gaining ground, it is possible that this could free up some space in the main block chain – unless it just increases activity.