Over a million Ethereum tokens have been burned since the big upgrade, but transaction costs are still a pain point for the network
- The Ethereum
London Hard Forkwas expected to reduce both the gas fees and computing power on the network.
- The EIP-1559 upgrade burns ETH on each transaction, creating a deflationary impact on the network.
- There are over 118 million
Ethereumin supply as of November 26.
By laying the groundwork for the ‘proof-of-work’ mining system, the developers were hoping that not only would the upgrade make the network more environment friendly but also potentially reduce the gas fees -- the cost of completing a transaction on the network.
Over the last 111 days, the network has burned over one million
What does cryptocurrency ‘burning’ mean?
With the EIP-1559 update, which is part of the London Hard Fork, a small amount of Ether is removed permanently from the network with each transaction.
This is called the ‘base fee’. It’s a fixed rate, which is not affected by the demand on the Ethereum network. It addresses an important question about the supply of Ethereum, and its value.
While the Bitcoin network says there will only ever be 21 million Bitcoins, it creates an artificial scarcity. Ethereum, however, has unlimited supply and this new upgrade introduced an element of scarcity to the network. It also helps reduce the gas fee to some extent, since users can pay only the base fee for a transaction if they want.
Faster transactions can be done by paying a ‘priority fee’ to miners, which is determined based on the demand on the Ethereum network.
Why are gas fees still a problem?
ETH transactions still require high gas fees to be paid, which was seen in the failure of ConstitutionDAO recently. Crypto internet came together to form a decentralized autonomous organization (DAO) and pooled in $47 million in an effort to win an auction. They lost, and though the donors of the DAO have been refunded their donations, they will have to lose the gas fees they paid to form the DAO — approximately 248 ETH.
AdvertisementA DAO is an organization that is formed using smart contracts. Instead of a board of directors or individuals, all the rules are coded into smart contracts, and changes can only be made if a majority of the members of the DAO agree.
As reported by Bitcoin.com, there are about 118 million Ether in supply today, and non-fungible token (NFT) marketplace OpenSea has been responsible for the most ETH burned so far — 110,081. With more blockchain-based games and other metaverse projects being built over Ethereum, reducing the gas fee is central to scaling the platform.
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