In the first week of August, Ethereum's long-awaited update EIP-1559 finally came into effect. An upgrade that the broad market had been waiting for a long time. And so far, the fee-burning mechanism introduced with this upgrade is working smoothly. In the last 24 hours, over 3 ETH per minute have been burned.
Now that the network is running smoothly: What impact has the upgrade had on the network so far? Significant. EIP-1559 has brought some noticeable changes to the network. This ranges from the price of the token to the way transactions are carried out. And even to how much miners are paid per block for their mining activities.
Reduced ETH supply
One noticeable change in the network is the reduced supply of coins. The amount of ETH burned so far has currently (time of this writing) exceeded 33,000. Normally, this amount of tokens would have gone into circulation - via the ETH paid to miners for the blocks they mine.
This shows the wider market how much ETH the network has brought into circulation through mining: over 33,000 ETH within a week.
The token burns are essentially coins sent to addresses with private keys that cannot be accessed. The network removes the coins sent to these addresses from circulation forever. Now, a third of the ETH that would have been mined is no longer in circulation. This corresponds to about 30% of the total net sales.
Deflationary development of Ethereum
Although the entire network is not yet fully deflationary, there have been cases where blocks have become deflationary. In some cases, fee pressure after EIP-1559 has resulted in burnt ETH being higher than the two ETH spent per mined block on the Ethereum network. This has only happened a few times - but it shows: Ethereum has the potential to become deflationary in the long run.
This reduced supply will lead to a higher value in Ethereum. ETH investors will see a higher value in the asset as there may be more demand in the market than supply. This in turn will lead to a shortage of the asset, causing the price to skyrocket.
The price of the digital asset has maintained its upward momentum throughout most of the week, currently trading at $3,163.