Ethereum, the second-largest cryptocurrency by market capitalisation after Bitcoin, underwent a major upgrade on August 5 this year. Called the London Hard Fork, the latest upgrade was a set of five Ethereum Improvement Proposals (EIPs). These included EIP 1559, which was aimed at changing the speed and incentivise the mining of the cryptocurrency. EIP 1559 also addressed the criticism Ethereum faced for rising network congestion and transaction costs by introducing a new burning method that simplified the process. Since the upgrade, more than 3 lakh Ethereum coins (Ether) worth over $1 billion (roughly Rs. 7,350 crore) have been burned, or taken out of circulation.
OpenSea, the popular NFT marketplace, accounts for the most burns on the Ethereum network, representing around 43,801 ether coins worth nearly $148 million (roughly Rs. 1,087 crore). It is followed by traditional ether transfers, which stands at 25,999 ether coins worth $88 million (roughly Rs. 646 crore).
According to crypto analytics group Dune Analytics, 3,09,973 coins have been burned so far. Their total worth stands at $1.05 billion (roughly Rs. 7,717 crore), that is lost forever.
The EIP-1559 changed Ethereum’s fee rate to a new scheme that makes Ether deflationary. It has been able to reduce the amount of ETH produced daily and increase the amount of burned ether. In the new scheme, one can burn a large amount of transaction fees —called the “base fee” — instead of sending it to miners. According to the EIP 1559 proposal, this was done to counterbalance Ethereum inflation while still giving the block reward and priority fee (the maximum fee users are willing to spend to add their transaction to a block) to miners.
One of the main reasons for the high rate of burned ether is Ethereum’s high transaction fees (gas fee). Ethereum handles an estimated 1.2 million transactions on the network daily.
According to CoinMarketCap, ether was trading at $3,517 (roughly Rs. 2.58 lakh) at the time of writing this report.
Ethereum is a decentralised, open-source blockchain with smart contract functionality and ether is its native cryptocurrency. It is represented by symbol ETH.