It has now been almost a week since the Ethereum London upgrade launched and over 20,000 ETH have been destroyed, giving analysts an estimation of a yearly burn rate.
Ethereum’s highly anticipated London hard fork was deployed last week on Aug 5. It introduced a new fee-burning mechanism as part of a restructure of the gas auction system for transaction payments.
Anywhere between 25% and 75% of the base fee is now being destroyed in an ongoing process that may turn the Ethereum ecosystem into a deflationary form of “ultrasound money” once proof-of-stake is rolled out.
More than 20,000 Ethereum burned
According to the ultrasound.money tracker, the amount of ETH already burned over the past five days is 20,600 at the time of writing. At today’s prices that is worth around $64 million burnt in less than a week.
The top Ethereum-based platform for burning fees at the moment is the OpenSea NFT marketplace, which has burned 735 ETH, or $2.3 million. Uniswap v2 is next with 348 ETH burnt and another NFT platform, Axie Infinity, has removed 318 ETH or almost $1 million in transaction fees.
Etherchain is reporting a burn rate of 3 ETH per minute, taken as an average over the past 24 hours. Extrapolating this equates to around 4,320 ETH per day, approximately 30,240 per week, and 131,000 per month. On a yearly basis, this could result in 1.57 million ETH being burned — approximately $4.9 billion at current prices.
Naturally, all of these figures are hypothetical as the fees will change with demand on the network and prices are not static. What it does show is a snapshot of current conditions. These figures could be much higher if Ethereum demand and prices increase over the next couple of years, which most analysts agree is highly likely.
$21B staked on ETH 2.0
Aside from using ETH for trading, decentralized finance (DeFi), or non-fungible token (NFT) minting, a large chunk has already be staked on the Beacon Chain. These tokens are locked away and immovable until “the merge” joins ETH 1.0 with the proof-of-stake blockchain sometime in late 2022.
At the time of press, there were 6.8 million ETH staked on the Beacon Chain according to the ETH 2.0 Launchpad. At current prices this is worth around $21 billion — higher than the entire Ethereum market cap was in April 2020.
This “ultrasound money” narrative has been reflected in ETH prices which have way outperformed bitcoin this year. At the time of press, the asset was trading up 5% on the day at $3,115.