Ethereum is about to switch back into deflationary issuance. This generally happens when on-chain activity and gas consumption increase.
On-chain activity on the Ethereum network has increased over the weekend. The uptick has resulted in more gas being used which means more ETH being burnt. The ETH burning mechanism was introduced with EIP-1559 in August 2021.
According to the Ultrasound.Money tracker, the XEN token network is one of the highest gas consumers at the moment. Over the past 24 hours, XEN has burnt more than 210 ETH, or approximately $260,000.
This is more than OpenSea, Tether, and Unisoft’s gas consumption. As a result, Ethereum issuance is close to zero (around 0.0011% per year).
What the XEN?
XEN Crypto is a project created by the “Fair Crypto Foundation.” It is backed by one of the first employees at Google working on cloud infrastructure, Jack Levin.
The ethos aims to empower the individual with a token with no fixed supply or pre-mint and no CEX listings, admin keys, or immutable contracts. However, several observers have pointed out that its Ponzi-type economics share similarities with the HEX token.
XEN was launched in early October. Furthermore, it can be claimed, minted, and staked by anyone. Judging by its gas consumption, there is still a lot of interest in the token and project. However, the XEN price has tanked 98.7% from its launch price peak of $0.00037.
Either way, XEN minting has been pushing up gas prices and pushing down Ethereum issuance. As observed by analysts, Ethereum deflation will be huge once on-chain activity picks up again.
Ethereum staking is also gaining momentum. According to Beaconcha.in there are 15.6 million ETH staked worth around $19.4 billion at current prices. Furthermore, the amount staked represents roughly 13% of the entire supply.
The Ethereum Shanghai upgrade has been scheduled for March 2023. The update will implement EIP-4895 which enables withdrawals of staked ETH.
Ethereum Price Outlook
Despite Ethereum’s positive economic factors, ETH prices remain depressed. ETH reached $1,280 over the weekend but failed to overcome resistance above this level.
As a result, the asset has fallen back during the Monday morning Asian trading session. ETH was trading down 2.2% on the day at $1,244 at the time of writing, according to CoinGecko.
Furthermore, the asset has been range bound since the FTX collapse in early November. ETH is currently down 74.5% from its peak price of $4,878 in November 2021.
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