According to Etherchain.org, over 500,000 Ethereum (ETH) have now been burned on the Ethereum blockchain. At the time of writing, the burnt amount is worth $1.7 billion. Formerly, the same amount in ETH would have been received by miners.
EIP-1559 Introduces Burning Mechanism
Following the implementation of Ethereum Improvement Proposal (EIP) 1559 in early August, the fee-burning mechanism became effective on the Ethereum network.
After the implementation, the miners’ fee that was previously used to reward miners for moving transactions was changed to a base fee. Now, miners can only be rewarded at users’ discretion via a tip, while the base fee is burned continuously.
With an increased number of transactions on the Ethereum network on a daily basis, more coins are getting burned, which increasingly makes Ethereum a deflationary asset with more coins burned than distributed.
Market Effect of the Fee-Burning Mechanism
As the number of coins present on the Ethereum network is constantly decreasing with the presence of a fee-burning mechanism, it is expected to have a positive effect on the price of the digital token ETH in the market.
With constantly reducing supply and fast-rising demand, traders and investors are liable to accumulate an asset while expecting a price increase. This has been the case for Ethereum (ETH) in the market.
With Ethereum’s 26% growth in October, the effect of the feed-burning has clearly been positive. After the implementation in August, Ethereum (ETH) experienced over a 20% surge in price but later lost its surging momentum.
At the time of press according to CoinMarketCap, ETH is trading at $3,517.30, with a relatively 2% price upsurge in the last 24 hours.