What happened: On Monday, a total of 7,376.40 Ether (ETH) worth $13,835,981 was burned from Ethereum transactions. Ethereum transactions involve sending Ether from one account to another. When Ether is sent to an unusable wallet, its supply is decreased because it is removed from circulation. This process is known as burning.
Why it matters: The Ethereum blockchain implemented an upgrade known as EIP-1159 on August 5th, 2021, which led to the burning of Ether. This upgrade provides a new fee model where each transaction includes a variable base fee that adjusts according to the current demand for block space. This base fee is permanently removed from circulation, which lowers the supply of Ether forever. This has led to Ether becoming a deflationary currency in the long term since burned Ether supply can never be replaced.
Ethereum is currently issuing new Ether at a rate of 4% per year. However, this is expected to decrease to around 0.5-1% as a part of the Ethereum 2.0 upgrade, causing the burn rate of Ether to be greater than the token’s issuance. Many speculate that this will transform ETH into a deflationary currency.
Yesterday, the net annualized issuance rate for Ether was -10.74%.
Data provided by Glassnode