The theoretical deflationary properties of the London upgrade from Ethereum last week have already been seen in action on the blockchain, with nearly 800 “deflationary blocks” produced.
A spike in the burn rate of Ethereum transaction fees has caused the offering to be deflationary for at least two hours. The grid has been under heavy load in the past few days, which has resulted in much more gas being burned.
As of 22:00 UTC, ETH Burn Bot recorded a case in which 545 ethers (ETH) were burned within an hour. Since Ethereum was reported to be issuing at 532 ETH per hour, this resulted in the asset experiencing a deflation of minus 13 ETH for that short period of time.
A few hours later, ETH Burn Bot spotted a major deflationary burn bot that burned 945 tokens within an hour, resulting in a temporary negative output of -417 ETH. She calculated this as an annualized deflation rate of -3.12%.
$ 945.1184 ETH burned last hour.
Edition: 528.0000 ETH
Net change: -417.1184 ETH
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. This was observed on a tracker from consulting firm Carbono, which is currently reporting that there have been 791 deflationary blocks to date, defining them as blocks where the fee burned exceeded the ETH mined.
Number of deflationary ETH blocks. Source: Carbono
When the London hard fork was deployed on Thursday, it introduced the much-anticipated upgrade of the Ethereum Improvement Proposal (EIP) 1559, which adjusted the system of calculating transaction fees. Part of this adjustment introduced a mechanism that burns off part of the basic charges levied.
According to ultraschall.money, which tracks the amount burned, 25,600 ETH have been burned at the time of writing. At current prices, this equates to around 80 million US dollars in just under a week.
The Ethereum economy is not expected to experience prolonged deflation until fee burning is combined with the reduction in block rewards issuance as a result of the proof-of-stake merger sometime in 2022.
Related: The Ethereum network burns 395K 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 has risen from a low of around $ 4 in late July to $ 20. Etherscan’s gas tracker reports up to $ 28.60 for a token swap on Uniswap.
The surge in demand for Ethereum block space was driven by non-fungible tokens, with the OpenSea marketplace, Gala Games’ Vox, and Axie Infinity all burning in the top 4 for gas burning totaling 2,200 ETH, or $ 7 million so far.