$4.6 billion worth of Ethereum has already been destroyed, here's why - 2 minutes read
Over the past year and a half, an astronomical amount of Ethereum (ETH) tokens have been destroyed, removing them from circulation for good. The total amount destroyed in this way since August of 2021 now stands at $4.6 billion! What is the reason for this?
Ethereum burning
It all started when a major update was made to the Ethereum network; EIP-1559. With this update, the so-called burning process was added. This ensured that part of all transaction costs incurred was not paid to miners that still existed at the time, but were burned and destroyed.
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Since the EIP-1559 update, 2.8 million ETH have already been withdrawn from circulation in this way. That represents about 2.3% of the total amount of ETH tokens currently in circulation and has a market value of $4.6 billion. So not nothing!
A lot of ETH was destroyed in the last seven days in particular. About 16,364 ETH to be exact. This was because activity on the network shot up again as a result of the nice price increase. High network activity generally also means more transaction costs, which means that more ETH is destroyed by the burning mechanism.
ETH is deflationary
The impact of EIP-1559 has turned out to be enormous. Since the launch of EIP-1559, a large amount of ETH has therefore disappeared. So much so that the total supply of ETH tokens has shrunk by 1.06% since August of 2021. So Ethereum has been deflationary during this period. More tokens were destroyed than were added.
Deflation is of course positive for the scarcity of ether. After all, there are simply fewer tokens to distribute to all interested investors. According to the law of supply and demand, this could therefore be positive for the price of Ethereum.
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However, there is no guarantee that the Ethereum network will remain deflationary in the future. The amount of ETH that is destroyed depends on the network activity. Should this activity remain very low in the future, few ETH tokens will likely be destroyed and the total supply will increase; so inflation.