Ever since EIP-1559 was activated on the Ethereum network, people have been abuzz with excitement/ Not entirely abnormal, as the second-biggest cryptocurrency by market cap is now burning a significant amount of ETH per block. As these numbers keep rising, one has to wonder what the future will hold for this ecosystem.
EIP-1559 Gets The Job Done
The main selling point of EIP-1559 is not the reduction in gas fees so many people want to see. Instead, the upgrade ensures a portion of all transaction fees – denominated in gas, but paid in ETH – are burned permanently. That is a crucial aspect of Ethereum’s network today, as the currency has no official hard cap for its supply. More Ether is generated every day, and burning some of it will ensure the overall supply doesn’t spiral out of control further.
Since the EIP-1559 introduction, the network has burned over 60% of the block rewards. That is a very high number, although also one that is to be expected. Burning over half of the block reward is essential to keep the overall ETH supply in check and ensure that it remains this way. While it will not make the Ether supply deflationary right away, it remains an intriguing overall development for this ecosystem.
Speaking of deflation, 14.29% of the network blocks created since EIP-1559 are deflationary. A respectable amount, considering how that network upgrade went live not that long ago. If this number can rise to 25% or more, things are bound to get much more interesting. It is an important first step either way and will significantly help the network and its users in multiple ways.
All of these metrics are a good indication of how the Ethereum network will evolve in the months and years to come. The EIP-1559 upgrade is significant for the ecosystem, and it seems to work out well so far. Reducing the overall ETH supply is beneficial in multiple ways, even if that means slightly less income for Ethereum miners. Those will become unnecessary when ETH 2.0 activates either way.
Slowly Gaining Ground
Contrary to what some people may like to see, the EIP-1559 upgrade is not the standard way of handling transactions just yet. Similar to SegWit for Bitcoin, initial use is high, but gaining more ground will be a serious challenge. For Ethereum, 50.35% of transactions are through EIP-1559, which is barely over half. Not terrible, but still somewhat disappointing in the bigger scheme of things.
Overall, nearly 54,000 ETH has been burned on the network since this upgrade. Although that doesn’t mean the same amount has been taken out of circulation, it is a very promising statistic. There will always be room to burn more ETH, and one can only hope that will be the case. Before that can happen, the EIP-1559 solution will need to be embraced by all service providers providing access to the Ethereum network. That process may take months, if not years, to complete.