2024-05-07
The daily amount of ETH burned on the Ethereum network has reached its lowest point this year, primarily due to a decrease in average gas fees.
Gas fees are currently ranging between 5 and 10 gwei, which is the lowest level seen so far this year and it is affecting the issuance of ETH.
The reduction in network fees has resulted in a decrease in the amount of ETH being burned.
On Sunday, only 610 ETH was burned, which is a record low for this year as gas fees remained minimal.
In contrast, during the first four months of this year, the daily amount of ETH burned remained above 2,500–3,000 ETH.
The decline in gas fees can be attributed to a shift in activity towards Layer 2 scaling solutions and the increased adoption of blob transactions introduced with the Dencun upgrade in March.
These changes have helped reduce transaction costs on Layer 2s.
The relationship between gas fees and ETH burning is an important aspect of Ethereum's economic model. While lower fees benefit network users, the decrease in ETH burn has an impact on the deflationary nature of Ethereum.
The London hard fork, also known as EIP-1559, implemented in August 2021, fundamentally altered Ethereum's fee structure. It introduced a base fee that is burned and a priority fee that acts as a tip to validators.
The base fee is directly linked to network usage, so higher fees result in a larger amount of ETH being burned and removed from the supply.
In the past week, Ethereum's supply has turned inflationary, with a growth rate of 0.49%, according to ultrasound.money.
Previously, Ethereum had a deflationary nature. However, if activity increases and more ETH is burned than issued, it would become deflationary.
