As a result of the London hard fork (EIP-1559), which took effect on August 5, the Ethereum network has withdrawn $30 million from circulation. The London hard fork modified the way miners get compensated.
Since it went into effect two days ago, Ethereum’s new transaction fee-burning mechanism EIP-1559 has taken $30 million in ETH from the network’s circulation.
As part of the Ethereum London hard fork on August 5, EIP-1559, one of five modifications, has been implemented, which replaces Ethereum’s auction-style transaction fee structure with an algorithmically determined alternative.
Instead of receiving transaction fees, users will no longer receive them unless they actively opt to “tip” miners; instead, the fees will be burned, lowering the total supply of Ethereum in circulation.
Ultrasound.money’s data shows that 1,332 ETH ($4.1 million) of the total 1,332 ETH ($4.1 million) burned so far has been generated through purchases and sales on the NFT marketplace OpenSea, where trading volumes have increased significantly since a CryptoPunks buying frenzy began last week.
The second most prolific ETH consumer is the decentralised exchange Uniswap V2, which has burnt 810 ETH ($2 million) in transactions.
The third game is Axie Infinity, an Ethereum-based game in which users acquire NFTs of monsters and pit them against one another in a battle royale fashion. Axie Infinity has spent 626 ETH ($1.9 million) on cryptocurrency mining.
Its COVIDPunks project, a CryptoPunks knockoff with a pandemic twist, is the fourth most gas-guzzling Ethereum project in terms of gas consumption, having consumed 528 ETH ($1.6 million) in total.
Tether (USDT), a stablecoin with a market capitalization of $62 billion, comes in fifth position. Tether, along with Tron, is constructed on the Ethereum blockchain, and it is responsible for the burning of 510 ETH ($1.5 million) in total. Stablecoins are cryptocurrencies that are “pegged” to a fiat currency on a one-to-one basis in exchange for a fiat currency.
Even though Ethereum’s London hard fork has fundamentally altered the way miners are compensated on the blockchain, there is yet more transformation to come. Ethereum is on the verge of making the switch from proof-of-work to proof-of-stake.
In the near future, the network will undergo a “merge,” which will connect Ethereum’s mainnet to the Ethereum 2.0 beacon chain—that is, when the present iteration of Ethereum will be linked up with the next generation of the network—to complete the transition.
When asked about the London update, Ethereum co-founder Vitalik Buterin responded that it serves as “proof that the Ethereum ecosystem is able to make significant changes,” and that it “definitely makes me more confident about the merge.”
The merger is also critical for Ethereum staking, which is essential for the operation of Ethereum 2.0. ETH 2.0 is now holding approximately 5% of the total amount of ETH in circulation. That equates to almost 6.5 million ETH, which is worth approximately $20 billion.
This figure is expected to rise following the merger, according to Alex Svanevik, CEO of blockchain analytics firm Nansen, who told Decrypt last month that investors will be able to withdraw their staked ETH after the merger.
A post-merge “cleanup” upgrade to enable for withdrawals of staked ETH is being planned by the Ethereum Foundation, and the foundation anticipates it to take place “very soon after the merge is completed.”