Ethereum’s network activity has dropped dramatically due to market slowdown. Both decentralized finance (DeFi) and the NFT sector were affected.
Gas prices for #Ethereum are at multi year lows, now back to May 2020 levels.
As a result, $ETH burned by EIP1559 is at an all time low, with just 11% of minted issuance being burned.
This is the most inflationary ETH has been since EIP1559 went live. pic.twitter.com/Jjzw3nJcN8
— _Checkɱate
(@_Checkmatey_) July 31, 2022
with Ethereum fees atlow dropOver $5 per transaction brought the ETH burned by the EIP-1559 to a record low, giving ETH the highest inflation rate since the EIP-1559 went live, as pointed out by the Glassnode’s lead researcher.
Ethereum uses a burning mechanism. to help users transition to the network A new proof-of-stake (PoS) from the current proof-of-work (PoW), the EIP-1559 burns Ethereum collected from fees associated with the verification of network transactions.
The goal of the sintering mechanism is to bring Ethereum to deflation, however, with the high rate of new ETH generation, it has prompted the network to go in the opposite direction of its intended purpose. But with Ethereum’s long-awaited “Merge” upgrade, it is expected to bring down the supply.
Lucas Outumuro, Research Director at IntoTheBlock believeEthereum’s net new ETH generation will be capped in the range of 0.5% to 4.5% based on network fees after the “Merge” upgrade.
“ETH will become deflation after the Merge upgrade.”
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