2021-8-10 19:08 |
The recent London hard fork in the Ethereum network has positioned Ether (ETH/USD) as a deflationary asset by introducing a new burn mechanism. A week after the update, a report has disclosed that the Ethereum network will burn approximately 1.83 million coins. Reportedly, this move will bring the inflation rate of the second-largest crypto lower than that of Bitcoin (BTC/USD).
According to the report, the calculations are based on the expectation that the base fee will account for 25% to 75% of the total transaction fees. Per actual data, which has been recorded since the launch of EIP-1559, the base fee accounted for 66.85% of the total fee expenditure. To obtain this value, Wu Zhuocheng, the report’s author, calculated the number of burned ETH from block 13283, the block that came after the upgrade, and found that the network had destroyed 9,482.2 ETH.
To get an approximate value of the ETH burned, Zhuocheng implemented the EIP-1559 fee mechanism to the Ethereum mainnet, which went live in 2015. The historical transaction fee of ETH is 4 million coins. As such, 66.85% of this value would be 2.674 million ETH. By assuming ETH is trading at an average price of $3,000.00 (£2,165.84), the amount of destroyed ETH would have been $8.02 billion (£5.79 billion).
The amount of ETH burned is dependent on the handling feeETH’s handling fee has increased since H2 2020, and the single-day transaction fee has not gone below 1,000 since May 10, last year. This was the beginning of the DeFi summer, which increased user demand, hence introducing high gas fees. During this time, the total handling fee for ETH was approximately 3.334 million. If there is a base fee, 2.23 million is expected to have been destroyed during this period.
By leveraging a stabilized fee, Zhuocheng found that the average amount of ETH destroyed per year will be 1.78 million.
Since May 10, 2020, the Ethereum network has generated 2.963 million blocks at an average transaction fee of 1.13 ETH per block. Hence, if the transaction activity in the coming year remains at this level and the gas limit stays constant at 15m, the network will burn an average of 0.89 ETH per block. With the block time of ETH being 13 seconds, the daily output will be 6,628 blocks. This means that the network will destroy 1.83 million tokens in the next year.
The post Report: Approximately 2M ETH will be burned in the next year appeared first on Invezz.
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