Over the past week, Ethereum is burning hotter than ever.
As per EIP-1559, a portion of all Ethereum transactions are destroyed: a piece of every NFT trade, yield strategy, and even simple token transfers. It’s all getting torched.
This burn mechanism also means that there is more ETH being destroyed than being issued to miners. Supply growth has now dropped to -1.06% per year since EIP 1559. This makes Ethereum more deflationary than Bitcoin, which was heralded as the original sound money (hence the use of the ultrasound money meme by ETH heads).
The below chart shows how the network’s token supply has changed over various checkpoints and upgrades. The dotted portion suggests that the deflationary trend is expected to continue over the next two years.
In this way, we might use this burn rate as another way to measure adoption for the network.
These two categories have been responsible for the destruction of almost 8,000 ETH this week, with the market leaders in each category—OpenSea (~1,298 ETH) and Uniswap V3 (~876 ETH)—being the key drivers of that.
This metric also gives us a touch more insight into the stablecoin battle between USDT and USDC. We all know that the former’s market cap is still miles ahead of the latter’s, but Tether’s offering is also responsible for more than three times the amount of Ethereum being burned.
As network activity continues apace, the Ethereum community will continue to watch it burn.
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