Ok, so the hot topic in crypto these days is burning Ethereum.
Let’s take a look at the data for the first days!
With the last upgrade called EIP1559 (London HF), one of the things that the Ethereum changed is the way fees are paid. Before all the fees that users pay were just going to miners. After the EIP1559, there is a so called base fee that miners get, but everything above that is being burned.
Here we will be looking at:
- Overall Ethereum Supply
- Ethereum Created Per Day
- Ethereum Created Per Day After The London HF
- Ethereum Burned Per Day After The London HF
- Share Of The ETH Burned From The Total Inflation
For the supply we will be looking for the overall existence of the Ethereum network and then we will take a closer look in the last week, after the EIP, August 5, 2021 till August 12, 2021.
Overall Ethereum Supply
The supply is always an interesting topic in crypto. At the moment of writing this, August 13, 2021, Ethereum has a total supply of 117M coins.
Ethereum had a presale in 2014, where 60M ETH ware sold to investors and 12M ETH was allocated to a development fund. A total of 72M starting supply. Since then, more than 45M ETH were mined and added to the supply. Still the initial supply represents more than 60% of the current supply. This is one of the reasons Ethereum gets a lot of critics.
Here is the chart for the ETH supply over time.
source
As mentioned more than 45M ETH in total were mined since its inception. We can see that the supply is slowly increasing. In the last year an approximate 5M ETH more was added to the supply. The year before that around 6M.
With 5M ETH created last year, the ETH inflation was around 4.4% in 2020, if we take the base supply of 114M ETH on Jan 1st, 2021.
Ethereum Created Per Day
The chart for the daily inflation looks like this.
We can see that at first the inflation was higher with more than 30k ETH generated per day. It has dropped since then and at this moment around 13.5k ETH daily is added to the supply. This is before the London HF and the start of the burnings that we will look at next.
Ethereum Created And Burned Per Day After The London HF
For the ETH created and burned daily I have used Dune Analytics. It’s a database tool for the Ethereum blockchain.
First the amount of ETH created per day.
As from the previous chart, we can see from here as well that around 13.5k ETH is created per day. The numbers can vary but in a tight range of ±100 ETH from that.
Next the important thing.
Ethereum Burned Per Day After The London HF
Here are the numbers for the Ethereum burned per day.
As mentioned, I’m using Dune Analytics for the numbers. I have forked a query that was showing the numbers for ETH burned per hour and adjusted it for daily burns (link).
The amount of ETH burned per day has been slowly increasing in the period. It started with around 3k ETH burned the first day, then 4k and now it has reached 5k ETH burned daily. How much ETH will be burned depends on the usage of the network and the fees spent.
5k ETH per day is equivalent of around 15M USD daily.
A total of 35k ETH were burned in the first eight days after the London HF, or an equivalent of more than 100M in USD.
Share Of The ETH Burned From The Total Inflation
When we plot the burned vs created ETH per day, we get this.
The burns have reduced the effective ETH inflation in the range of 8k to 9k ETH per day, down from the 13.5k.
If we plot all the ETH burned vs created for the period we get this pie 😊.
More than 30% reduction in inflation for Ethereum in the first eight days after the London HF. This is a significant number, meaning that the ETH inflation can be under 3% now.
As mentioned already, the numbers for ETH burned are not fixed and they can vary depending on the usage of the network.
Overall, the ETH London upgrade has contributed to burning ETH with more than 30% of the new inflation now being burned.
I’m not sure how will the fees’ structure works when ETH transition to ETH 2.0 and proof of stake. This phase with burning ETH probably will change.
This said, I’m not a fun for burns lately. Burns can be appealing and lead to the so called hard asset category, but then why created the coins in the first place? Its almost like the todays taxes system 😊. Inflate the token and then collect fees and burn them.
Any excess supply can be put back in the system and reward participants and stakeholders. This is actually creating value for the system. If just one project that is funded from this type of inflation succeed it will pay of greatly for all the inflation. Or the inflation can be just used as a higher interest for stakeholders.
Anyways these topics are always up to debate, and it remains to be seen how things develop going forward. For now, the market reaction is positive 😊.
