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    Home » Crypto News » Ethereum Inflation to Highest Levels Since EIP-1559 Implementation

    Ethereum Inflation to Highest Levels Since EIP-1559 Implementation

    Author: Chayanika Deka

    Last Updated Aug 1, 2022 @ 14:42

    Ether, once a purely inflationary coin, appears to be heading back to its roots. But experts are confident it will gain prominence as a deflationary asset after the Merge.

    Ethereum’s network activity has plunged considerably due to the market downturn as the decentralized finance (DeFi) and NFT sectors took a hit.

    Gas prices weren’t spared either. In fact, new data suggested that these figures have reached multi-year lows and are now treading near May 2020 levels.

    • With Ethereum fees dropping below $5 per transaction, ETH burned by EIP-1559 has hit an all-time low. Furthermore, only a mere 11% of minted issuance has been burned from circulation.
    • This is the most inflationary ETH has been since EIP-1559 went live., as pointed out by Glassnode’s lead researcher.

    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

    • Ethereum adopted burn mechanics as a means to help transition users over to its new proof-of-stake (PoS) network from the current proof-of-work (PoW).
    • The EIP-1559 update was introduced last summer, and it essentially burns Ethereum gathered from fees associated with verifying transactions on the network.
    • The aim of the burn mechanism was to make Ethereum deflationary. However, the high issuance rate has prompted the network to go in a different direction.
    • The Ethereum’s long-awaited “Merge” upgrade, on the other hand, is expected to deflate the supply with the help of EIP-1559 by burning ETH.
    • IntoTheBlock research director Lucas Outumuro believes that Ethereum’s net issuance will be confined within the 0.5% to 4.5% range based on network fees following the merge.
    • As per the exec’s findings based on historical data, the net issuance of ETH will decline, prompting a price rally as its circulating supply goes down. He added,

    “ETH will become deflationary following the merge.”

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    Tags: Ethereum
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    About The Author

    Chayanika Deka
    More posts by this author

    Chayanika has been working as a financial journalist for three years. A graduate in Political Science and Journalism, her interest lies in regulatory implications with a focus on technological evolution in the crypto realm. Contact:Linkedin

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