Ethereum’s (ETH) EIP-1559 proposal, which modified the network’s fee mechanism to bring it closer to a proof-of-stake model, appears to have turned away Ethereum developers on the second-largest blockchain.
The Ethereum (ETH) Network however has revealed its set date for its much-anticipated “Merge,” or switch to a proof-of-stake (PoS) paradigm. The announcement appears to be a short-term boost to the ETH token’s price.
The number of Ethereum mainnet contracts deployed dropped below 200K
Smart contracts on the mainnet have decreased drastically following the launch of EIP-1559, according to data shared by Alex Svanevik, CEO of Nansen. The number has dropped below 200k for April 2022, Meanwhile, the contracts exceeded 1.4 million in April 2021. This has generated serious doubts about the mechanism’s utility.
In addition, the EIP-1559 proposed incentivizing miners while reducing the network gas fees. Ethereum’s mining revenue has also decreased to an average of $23,587.17, according to Glassnode. It was the lowest level in the last five years. The last 5-year low was recorded on December 24, 2019. Meanwhile, the difficulty of mining ETH has reached an all-time high.
Why isn’t this a bearish sign for ETH?
It appears that implementing the new technique is proving expensive for the network. However, Svanevik pointed out that the majority of the contracts that had left were related to gas and were rendered irrelevant by the proposal. As a result, the figures show a significant difference. The same is the case with GasToken, ChiToken, and empty contracts. The data does not point to a bearish trend for the network and token. The decreased contract number is mostly because gas tokens are no longer functional.
This indicates that developers are shifting to L2, where contract deployment requires fewer funds. If they’re working on anything new, the developers will almost certainly shun the mainnet. On the market side, the price of ETH tokens has dropped by over 26% in the last 30 days, mirroring losses in its larger peer Bitcoin. The average price of an Ethereum token is $2,382.
