With the introduction of the burning mechanism protocol EIP-1559 in August by the London hard fork, a significant amount of Ethereum tokens (over $1 million) were burned in September. The EIP-1559 protocol was introduced to reform the Ethereum fee market by modifying the gas fees limit and canceling a good portion of the transaction fees.
The Ethereum token burn protocol was supported by notable dApps and NFTs like OpenSea.io and Axie Infinity. Many decentralized exchanges like Uniswap, Sushiswap, 1inch, etc., also contributed to a large portion of the ETH burns. Ethereum tokens are also burned during the stablecoins transfers on the Ethereum blockchain network like USDT (Tether) and USDC (USD coins).
As per reports, the recorded current daily burn rate of Ethereum is 11,588 ETH which is worth around $50 million per day. In 24 hours, the blockchain network has put out Ethereum circulation at an average rate of 8 ETH per minute. If the burning continues at this rate, the network will be able to burn 4.2 million ETH per year, worth approximately $18 billion.
Such burning of the Ethereum tokens helps keep the gas fees under control, thereby helping the miners scorch off the exuberant transaction fees. With this burning mechanism put to use, the supply inflation of the Ethereum tokens was only reduced by 1% per year as the mining of Ethereum tokens per year still stands at 5.4 million; more ETH tokens were burned since August than they were mined which caused a deflationary drift in the ETH tokens.
It is expected that with the “merge” or “dock” of ETH 1.0 chain with ETH 2.0 Beacon Chain at the beginning of 2022, the Ethereum network will swing to fully deflationary issuance, thereby decreasing the supply of the ETH tokens by -3.2% per year. The merge will mark the end of PoW (Proof-of-work) and the transition of PoS (Proof-of-stake).
ETH is currently trading at $4,287 per day that shows that the asset price has reduced to a whopping 12% from its all-time high of $4,878 recorded on November 10. Before the merge takes place, the stakers can take full advantage of the increased annual earnings totaling around 5.2%, but this will not last for long because there will soon be deflationary issuance of the ETH tokens.