ETH Worth $6 Billion Burnt After EIP-1559 As We Move Closer to Ethereum 2.0 Launch

21. Mar 2022 Posted by Akolkar B on News

Although the ETH price has been subject to greater volatility in 2022, the Ethereum ecosystem has been making a considerable progress as in whole. Ever since the London hardfork last August 2021 and the implementation of the EIP-1559, the network has burnt a total of over 2 million ETH worth a staggering $6 billion.

This means that more than 2 million ETH have been moved out of circulation creating a deflationary effect. The Ethereum Improvement Proposal 1559 is basically the technical name for the burn mechanism that aims to control the gas fees from exploding.

The EIP 1559 implementation splits the gas fee into two parts - the base fee and the tips offered to miners. The base fee is burnt meaning ETH has been moved out of circulation. The overall deflationary effect results into fewer and fewer number of ETH available in circulation.

Ethereum developers have been working on moving the Ethereum network from the existing proof of work to the proof-of-stake platform. The goal behind is to attain greater scalability, reduce congestion, and lower the transaction costs. Furthermore, the PoW network involves the activity of mining which has drawn environmental concerns for its huge electricity usage. The PoS Ethereum 2.0 will solve this issue.

Last week, Ethereum co-founder and CEO of ConsenSys - Joseph Lubin - said that Ethereum 2.0 “will lay to rest Ethereum’s carbon or energy footprint problem”.

“Another exciting thing about moving to proof-of-stake is that proof-of-work requires a lot of issuance of ether [the term used to describe Ethereum the cryptocurrency rather than the network] in order to incentivize these people with heavy infrastructure, to lend their resources and validate transactions on the network,” said Lubin. “So if you have very light infrastructure, then you can issue much less ether per block that's constructed.”

Lubin expects that all the changes within the Ethereum network and the launch of Ethereum 2.0 shall happen by Q2 2022. He also notes that the successful implementation of EIP 1559 means that Ethereum will “be burning more ether every single day than is issued, because much less ether will be issued to secure the network”.

Thus, he refers to ETH as “ultra sound” money. Ethereum (ETH) has been one of the top performing cryptocurrencies and is currently trading close to $3,000. Some analysts believe that ETH holds the potential to touch $10,000 this year.