Ethereum prices remain below $2,000 months after the network initiated EIP-1559, trackers on March 28 reveal.
ETH, the native currency of Ethereum, is currently trading at $1,717, stable on the last day and week but retracing from recent highs of around $1,850.
The network has burnt over 3 million ETH from gas fees since the activation of Ethereum Improvement Proposal (EIP) 1559 in August 2021, a move that gradually makes the coin deflationary. However, despite this, the coin has been unable to break above $2,000 since May 2022.
EIP-1559 was an intervention by the developer community to reduce the supply of ETH and it was a new way for Ethereum to calculate process transaction fees, effectively adjusting the fee market and making gas more predictable. Earlier, Ethereum used an auction system where miners prioritized transactions tagged with high fees.
In EIP-1559, the team agreed to introduce a base fee and a “tip” for every gas fee paid in a transaction. The base fee is what everyone transacting on Ethereum must pay. Notably, this fee will be adjustable depending on network demand and would be burned.
At the same time, the transactor would give a “tip” to the block validator as an incentive to include their transaction in a block. This fee is optional, and only those who want their transactions to be included in blocks faster can pay.
From August 2021, when Ethereum introduced EIP-1559, the network has burned over 3 million ETH. At the same time, over 69,450 ETH has been destroyed since the Merge, when Ethereum officially transited to a proof of stake system, switching off miners.
Considering the current pace of ETH burning, the coin has been deflationary by 0.1% annually. Proponents are bullish that ETH will never be inflationary again, a move that could push prices even higher in the months and years ahead.
The pace of ETH burning depends on network activity. Over the months, especially during the 2022 bear run, ETH and token prices crashed, as DeFi and NFT activities also fell. The total value locked (TVL) in DeFi remains less than half the peaks of 2021, while NFT trading is subdued even with the recovery of asset prices in Q1 2023.
Trackers on March 28 indicate that ETH transfers contribute to the bulk of coins destroyed since EIP-1559. From August 2021, users transferring ETH between addresses have contributed to 266,217.50 ETH being destroyed.
Meanwhile, because of NFTs, primarily through OpenSea, 230,050 ETH have been burned, with 152,369 ETH destroyed from Uniswap’s trading activities.
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