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Ethereum Inflation to Highest Levels Since EIP-1559 Implementation

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

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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.
  • 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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