Following its most recent and much anticipated network upgrade, Ethereum (ETH) is currently burning over USD 8 million in ETH each day, with a total burn of nearly USD 12 million. Meanwhile, it appears that there was a lot of uncertainty among miners on the first day.
At the time of writing, a total of 4,260 ETH has been destroyed, with the amount climbing by the minute. According to the current price of ETH, this is USD 11.83m that has vanished into thin air.
Furthermore, the current Etherchain burn rate is ETH 2.08 – or USD 5,774 – every minute. This equates to USD 346,440 per hour. If the burn rate and price remain constant or close, USD 8.32m worth of ETH will be burned in the next 24 hours.
As previously noted, the Ethereum London upgrade arrived yesterday, bringing with it the much-debated Ethereum Improvement Proposal, or EIP, 1559. This EIP includes an automatic token burn mechanism for each transaction and is expected to assist enhance the fee market.
Meanwhile, COVIDPunks – a drop of 10,000 non-fungible tokens (NFTs) inspired by Larva Labs’ super-popular CryptoPunks – is the current lead burner, according to Ultrasound.money. COVIDPunks have burned 527.46 ETH.
OpenSea, an NFT marketplace, comes in second with ETH 504, while Uniswap V2, ranked third, has burned ETH 336 so far.
Hayden Adams, Founder of Uniswap, also commented on the burn rate, claiming that at this rate, the protocol will consume roughly USD 1 billion per year.
However, Hasu, a crypto researcher, emphasized that the present burn rate will not endure indefinitely.
Alex Svanevik, data scientist at blockchain analytics platform Nansen, also saw a decline in the median gas price, but claimed that for the time being, usage of EIP-1559 is limited, adding that “less than 2% of transactions make use of EIP-1559 capabilities.”
Some commenters, on the other hand, are perplexed and disappointed with the improvements that London was/is intended to bring. One user claimed that they expected more predictable costs with the advent of EIP-1559, but one of their transactions “really almost quadrupled since yesterday,” while another in the same thread claimed that the base price is “now reliably quite high.”
Others, on the other hand, contended that “‘predictable’ and cheap are two quite different things.”
Notably, a number of crypto experts have previously stated that the EIP is not intended to cut costs, and that any changes that occur as a result of the network update are unlikely to be noticeable immediately.
However, we can examine its current situation.
On August 5, the price of ETH increased noticeably from USD 2,572 to USD 2,817. Overall, it has increased by 3% in the last 24 hours and by 17% in the last week. ETH is now trading at $2,776 USD (at 8:35 UTC).
The average transaction cost (7-day simple moving average) increased from USD 8.3 on August 4 to USD 9.54 the following day, according to Bitinfocharts.com. The median transaction fee (7-day simple moving average) increased somewhat during this time period, from USD 3.5 to USD 4.
Since July 1, the network hashrate has been steadily increasing, and this trend has continued in recent days.
According to Ethereum co-founder Vitalik Buterin, “1559 is undoubtedly the most important area of London,” and the London upgrade is “evidence that the Ethereum ecosystem is capable of making substantial improvements.”
This update “certainly increases my confidence in the merge,” he told Bloomberg, referring to the current Ethereum mainnet’s merger with the beacon chain proof-of-stake (PoS) system (expected in late 2021 at the earliest).
Miners’ bewilderment, misunderstandings, and unwillingness
As for miners, some of whom had previously protested coin burning, some of whom are still opposed to the EIP, some of whom appear to be surprised by some of the benefits that they claim to see from the upgrade, but there also appears to be plenty of confusion, given that the upgrade occurred only a day ago.
Michael Carter of the miner YouTube channel ‘Bits Be Trippin’ tweeted that he has “got a metric ton of inquiries from miners since EIP-1559 went live,” noting that there is “confusion on total ETH burned vs. transactions” and other parts of it.
“I will admit that I did not expect EIP-1559 to be implemented and mine profitability to increase,” MeanHash B tweeted, adding, “We will see what happens over the next few days, but for now it has actually increased.”
According to Bitinfocharts.com, Ethereum mining profitability (7-day simple moving average) has been increasing since late July, with a modest increase between August 4 and August 5, from USD 0.076 to USD 0.079 per day for 1MHash/s. In the same time span, raw values show a greater jump from USD 0.0762 to USD 0.0905.
There are also claims that the blocks are faster, however it appears “like there is motivation for miners to hit blocks faster even if they aren’t full, because filling a block isn’t rewarded at the same rate it used to be,” according to MeanHash B.
In reaction to Buterin’s tweet about full blocks, Hasu stated that “it appears that yesterday’s hunch that 1-2 pools may be purposely mining smaller/empty blocks in response to EIP-1559 couldn’t be validated in the wider picture.”
Just days before the upgrade, Compass Mining’s Editorial Director, William Foxley, wrote that “miners will experience heartache given a projected 20 percent -30 percent decline in revenue,” with a drastic decrease in miner extractable value (MEV) rewards since May’s price correction “making an already bleak situation look even worse.”
According to Foxley, of the three revenue streams – inflation rewards, transaction fees, and MEV incentives – miners should expect the first to account for the majority of their revenue in the future.
“On the plus side,” he adds, “the identical technological advancements that are taking fees away from miners may happen to boost the value of the underlying asset.”
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