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Developer Hails ETH Burning, Will Ethereum Break $3,000?

Péter Szilágyi, an Ethereum (ETH) developer, has lauded EIP-1559 and its ETH burning mechanism as “the great equalizer.” Taking to X on January 16, Szilágyi admired EIP-1559’s ability to “level the playing field between validators and regular users.”

Developer: EIP-1559 Is A “Great Equalizer”

Since the implementation of EIP-1559, Ethereum adjusted how users bid gas fees, introducing the “base fee,” which was burned or sent to an irretrievable wallet. So far, data from Ultrasound Money shows that over 3.9 million ETH have been destroyed.

In the last week alone, the Ethereum network automatically sent more than 21,100 ETH out of circulation, “burning” ETH’s supply. 

ETH burning | Source: Ultrasound Money

Specifically, Szilágyi mentioned the advantage regular users have with EIP-1559. Through this implementation, validators (previously miners before Ethereum shifted to a proof-of-stake blockchain) no longer have the privilege of arbitrarily adjusting gas limits and transaction fees. 

Earlier, that leeway created what the developer described as an “imbalance,” which made it tough for “regular users to compete.” However, following this implementation, everyone must adhere regardless of status as a validator, founder, or user. 

With EIP-1559, the “base fee” adjustment is set at the protocol level. It is this base fee that the network burns, gradually making ETH deflationary, reading from the number of coins taken out of circulation since EIP-1559 went live in early August 2021. Even so, a sender can “tip” the validator, incentivizing them to prioritize validating a transaction.

Stability And Predictability Achieved, Ethereum Upsides Capped At $3,000

Szilágyi’s comments reflect a growing consensus among Ethereum supporters regarding the positive impact of EIP-1559. Though a big percentage of EIP-1559 is fixated on the price impact of the proposal, there is more that it achieves. 

Most importantly, from a user experience perspective, it is now easier for senders to predict how much they will pay for a transaction. This is crucial, especially when the network is congested. Additionally, though the Ethereum gas fee remains relatively high, EIP-1559, though considered a “bad idea” by Szilágyi, has stabilized the network. 

Ethereum price trending upward on the daily chart | Source: ETHUSDT on Binance, TradingView

ETH burning is attributed to reducing inflation in Ethereum, a network whose total supply is not capped like Bitcoin. Over the long term, prices might benefit from this proposal. However, prices are bullish in the short to medium term. Still, upsides are limited to around the $3,000 psychological round number.

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Ethereum Crosses $5 Billion In ETH Burned As Momentum Picks Up

Ethereum implemented the EIP-1559 in 2021 and since then, ETH has been burned every day. This upgrade has pushed the network towards becoming deflationary, taking more than 30% that would have gone straight into circulation and burning it. Now, only seven months after the upgrade was implemented, the network has reached another milestone of ETH burned in terms of dollar value.

Over $5 Billion In ETH Burned

On August 5th, the EIP-1559 officially went into effect. This came with much fanfare given the implications of such an improvement on the network. It has burned ETH since then and accelerated over the next few months as network activity rose due to the rise of the decentralized finance (DeFi) space. The burn had quickly surpassed $1 billion burned, and now seven months later, there have been over $5 billion worth of ETH burned.

Related Reading | Bitcoin Breaks Above $40K Again, But When Will Consolidation End?

This comes in light of the recent acceleration recorded over the last six months. In this time frame, the rate at which ETH is being burned is up 559%. The volume burned all comes from fees as the network has seen higher activity in recent times. The burn is important given that it permanently removes all of the burned coins from circulation. This means that since August 2021, more than 1,950,00 ETH have been removed from circulation.

At this accelerated rate, the network is seeing about 80 ETH burned every hour. This translates to more than $200K worth of ETH being burned every hour. The burn over the last seven months has since the net reduction reached as high as 67%.

ETH declines to $2,500 | Source: ETHUSD on TradingView.com

Ethereum planned to have 2.6 million ETH burned in the first year of the implementation and at the current rate, it looks like the network will actually be at this milestone long before August 2022.

Ethereum Heading Towards Consensus Layer

Ethereum’s move to the consensus layer (previously referred to as ETH 2.0) is growing closer by the day. The final merge is expected to take place sometime in the middle of 2022, leaving only a few months until the estimated time of launch. This will put the network on a completely new path, making it more efficient, scalable, and safe for all users of the blockchain.

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Ethereum still remains the second-largest cryptocurrency in the space by market cap. It is currently trending around $2,500, a critical support point for the digital asset. Its market cap sits at $311 billion at the time of this writing.

Featured image from CryptoPotato, chart from TradingView.com

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Over 1 Billlion ETH Has Been Burned Since Ethereum EIP-1559

The Ethereum network has been burning ETH since the EIP-1559 first went into effect in early August. Since then, a portion of fees has been continuously burned, taking a large portion of the digital asset out of circulation. This hard fork had been implemented to combat the inflationary nature of Ethereum and it has been successful as countless blocks have been deflationary since the hard fork took place.

ETH Burned Clocks 1 Billion

The amount of ETH burned has risen along with fees on the network. Increased network usage had caused transactions costs on Ethereum to skyrocket and since EIP-1559 was implemented to burn a third of all fees, a higher volume of ETH has been constantly taken out of circulation. The number had quickly hit 1 million ETH, then 10 million, and by 100 million, the community had turned its eyes towards the billion mark.

Related Reading | Institutional Buys Will Put Bitcoin At $500,000 In Five Years, Cathie Wood

Ethereum hit this number on Wednesday when the total number of ETH burned on the network had crossed 1 billion. It only took a little over three months to hit this number and as burning ramps up on the network, it may take even less time to hit the 2 billion mark.

At the current ETH price, the total amount of ETH burned comes out to over $4.2 billion. Prior to EIP-1559, all this volume would have gone into circulation, increasing the amount of circulating ETH, contributing to the inflationary nature of ETH. However, with the burn, Ethereum is headed towards a truly deflationary future.

Impact Of Ethereum Burn

Although Ethereum is not fully deflationary, the impact of the ETH burn has shone through the network in recent times. Some interesting stats show that ETH being put into circulation per mined block has reduced significantly. Since the hard fork, the net reduction has reached as high as 67.16%.

Related Reading | Why This Crypto Billionaire Abandoned Ethereum

Additionally, net issuance has also dropped in line with net reduction. Net issuance on the Ethereum network is currently sitting at 490,400 at the time of this writing. There have been 1,493,739 ETH rewards issued, translating to a little over $6.3 billion. While tips on the network have done significantly well, with over 200,000 ETH tipped so far, totaling $846 million.

How Price Has Done In Contrast

Ethereum’s price has done tremendously well since the burn began. Since August, the digital asset has hit multiple new highs and come close to testing the $5,000 resistance point. The asset has since taken a beating down along with the rest of the crypto market but it has held up above $4,000 despite bears trying to pull the price down.

ETH recovers after dip | Source: ETHUSD on TradingView.com

Indicators have remained bullish even when the market has not fared so well. Analysts have put the digital asset at $5,000 by year-end, propelled by the growth of DeFi. As more investors flock to the blockchain to take advantage of this new industry, Ethereum shows great promise of hitting this price before 2021 runs out.

Featured image from Genesis Block, chart from TradingView.com

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Ethereum Fee Burns Clocks $100 Million, Here’s Why The Burn Is Important

The Ethereum network has now continuously burned base fees for a week straight and in that time frame, the amount of ETH burned has hit $100 million. With over 32,000 ETH burned in the space of seven days. The fee burn rate fluctuates given the network traffic, but the burn continues regardless. Depending on network traffic going forward, the burn rate is predicted to hit 4 ETH per minute very soon.

Related Reading | Ethereum Set To Explode According To Market Dominance, Crypto Analyst

The rate at which the ETH is burned currently sits at around 3.38 ETH per minute. This puts the current burn rate at over $10,000 burned per minute. The burn shows that the EIP-1559 upgrade is working as intended, which in the long run will hopefully make the nature of ETH deflationary. But that is not happening just yet. The burning of the base fee is still in its early stages, although it is working smoothly.

It will take a while for the rate at which new ETH is burned out of circulation to be high enough that ETH’s supply becomes deflationary. But that remains to be the end game here. And this is why the burn is so important to the network.

Related Reading | Here’s What Happens To All Of The Crypto Assets The IRS Seizes

The fact that Ethereum does not have a capped supply like bitcoin means that an unlimited number of ETH can be put into circulation. This is one feature that ETH has in common with fiat, the unlimited supply. It is one of the main reasons why the move to ETH 2.0 is so important to the network.

Putting Less ETH Into Circulation

The ETH burn is basically taking away a huge chunk of ETH that miners would have been given for mining blocks and “burning” the coins. EIP-1559 introduced a base fee mechanism that is determined by the wallet where a transaction is generated and this base fee would be burned. Then the owner of the wallet where the transaction is generated can then add a ‘tip’ to a transaction if they want their transaction to be included in a block faster, basically leading to faster confirmation times.

Related Reading | Why A Shocking Altcoin Season Could Be On The Horizon

In just a week, 32,000 ETH has been burned. This 32,000 ETH would have formerly been added directly into circulation as it is given as a reward to miners. But now, this amount that would have added to supply has been completely taken out of the equation.

For now, it may seem like miners are getting the short end of the stick with this, but ETH potentially becoming deflationary is a win for the market as a whole. Less supply would make ETH coins more valuable, which, in turn, would drive up the price of the asset.

Ethereum Price Going Forward

ETH price has had an interesting run these past three weeks. The asset price which had broken below $2,000 last month experienced a price surge that sent the price surging past $3,000 this month. Ending a two-month-long streak of a painful downtrend.

ETH price dips as the week draws to a close | Source: ETHUSD on TradingView.com

Following the launch of the EIP-1559 saw the Ethereal network become even more popular amongst investors. And as the popularity of the network grew, so did the popularity of its native token, ETH. With more investors coming into the market, the value of the asset has skyrocketed. Although now there has been a bump in the road as a dip in the price has sent ETH barreling back down below $3,100.

Related Reading | Bulls Take Over Market As Ethereum Price Surpasses $3,000, Why Rally May Continue

Short-term, recovery is imminent, as is the case following most dips. But the scale of the recovery will be hard to tell. A 3% price drop in the last 24 hours has seen ETH lose $200 off its price in the same time period. But overall, the market remains bullish and it looks like the dip is only a small obstacle that will be scaled in no time.

Featured image from Coingape, chart from TradingView.com

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Bullish Ethereum Fractal Appears As Important EIP-1559 Upgrade Debuts

All eyes today are on Ethereum as the long-awaited EIP-1559 launches for the first time. The supply-focused update could result in a the start of a spectacular show that could last another several months.

A fractal has potentially appeared that mimics the price action just ahead of the most recent explosive Ether rally, which took the top altcoin by market cap from below $1,000 to more than $4,000 at the peak. And it all is happening as the London hard fork is implemented into the most important blockchain in the space.

What Is EIP-1559 And Why Does It Matter?

Today, Ethereum Improvement Protocol 1559 will be set live as part of the London hard fork. The upgrade will help to normalize ETH gas fees that during the peak NFT and DeFi boom of 2021, sent costs skyrocketing.

Base fees will be algorithmically determined by the network, however, the user can also increase the fee to in essence “tip” a validator. To prevent validators from artificially flooding the network to keep fees high, validators don’t get this base fee, instead it is burned.

By destroying coins and taking them out of the circulating supply, investors believe this can further impact the ongoing “supply shock” or lack of ETH reserves on exchanges currently.

In addition to this new EIP-1559 upgrade that could impact supply, it is part of a greater Ethereum 2.0 update. More than 5% of the entire supply is now locked up in the ETH 2.0 smart contract, in addition to the massive amount of tokens tied up in DeFi protocols.

With so few ETH to go around, the supply shock could be very real and it arrives at the same time that a potential fractal is appearing on the ETHUSD price chart.

Does an Ether fractal point to another parabolic rally? | Source: ETHUSD on TradingView.com
Supply Shock Ethereum Fractal Fits Blueprint To Substantial Highs

Ethereum was among the cryptocurrencies hit the hardest from the historic Q2 selloff. From the exact peak to the low, the second largest coin in the space by market cap plummeted by 61.8%.

Related Reading | The Ominous Ethereum Comparison That Will Leave Bulls Petrified

The peak was followed by two consecutive bumps, followed by a break of downtrend resistance. Zooming out, shows that the same exact pattern formed just ahead of the cryptocurrency’s more than 1,000% rally. Taking the price action on the way up and juxtaposing it over the recent consolidation, and there’s a very similar trajectory potentially forming.

Could the EIP-1559 upgrade cause an extended fifth wave? | Source: ETHUSD on TradingView.com

Zooming out further, the entire structure fits and five-wave bullish impulse according to Elliott Wave Theory. Even the math adds up. Waves 1, 3, and 5 move up with the primary trend, while even numbers 2 and 4 are corrective phases.

Related Reading | Fundamentals Suggest Cryptocurrency Is Massively Undervalued

Waves 2 and 4 tend to swap in severity, with wave 2 this time falling under the weaker of the two. The top altcoin only then suffered a 38.2% drop – another Fibonacci retracement level. Wave 4 reached the full 61.8% in severity, and if the bottom is in, a whopping wave five could be next.

Wave 1 resulted in 450% returns, and wave 3 added another 1300% to boot. An extended wave 5 could yield dramatic results. Is this what is to come next for Ethereum and could it be due to the EIP-1559 upgrade?

Potential last leg up in #Ethereum looks almost too easy to spot. Is this time really different? https://t.co/V0q2ied5aU pic.twitter.com/rDyJ6uscDB

— Tony "The Bull" Spilotro (@tonyspilotroBTC) August 5, 2021

Follow @TonySpilotroBTC on Twitter or via the TonyTradesBTC Telegram. Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com