The Ethereum network has experienced a notable decline in the daily amount of ETH burned, reaching its lowest level this year.
The Ethereum network has experienced a notable decline in the daily amount of ETH burned, reaching its lowest level this year. This has resulted in fewer ETH being burned. On Sunday, only 610 ETH was burned, setting a record low for this year as Ethereum's gas fees remained minimal. In contrast, during the first four months of the year, the daily amount of ETH burned stood consistently above 2,500-3,000 ETH.
The ongoing decline in gas fees can be attributed to several factors. Firstly, there has been a shift in activity towards Layer 2 scaling solutions, which offer improved scalability and lower transaction costs. Additionally, the adoption of blob transactions, introduced with the Dencun upgrade in March, has contributed to reducing transaction costs on Layer 2 solutions.
The London hard fork, also known as EIP-1559, implemented in August 2021, brought about a fundamental change to Ethereum's fee structure. This upgrade introduced a base fee that is burned and a priority fee that serves as a tip to validators. The relationship between gas fees and ETH burning is closely monitored as an essential aspect of Ethereum's economic model. While lower fees are advantageous for network users, the decrease in ETH burn has implications for the deflationary nature of Ethereum.
In recent weeks, Ethereum's supply has shifted towards being inflationary, with a growth rate of 0.49%, according to ultrasound.money. However, if activity picks up and more ETH is burned than issued, Ethereum could return to a deflationary state, where the supply decreases over time.
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