Ethereum Burns Only 210 ETH, a Lowest Record This Year!

Bittime - Saturday, August 10 2024, only 210 ETH was recorded as being burned on the Ethereum network. This is the lowest number throughout 2024. Read this article to find out the full news!

Ethereum Burning Mechanism

Source: Theblock.co

After the London hard fork in August 2021, the Ethereum network introduced a base fee burning mechanism as part of its transaction fee structure. This means that the Ethereum used to pay these fees is permanently taken out of circulation, reducing the total supply of ETH. 

This burn is expected to create deflationary pressure on the ETH supply as network activity increases. However, with gas fees dropping to their lowest levels in recent years, the amount of ETH burned daily has also dropped drastically. 

On August 5, 2024, as much as 5,000 ETH was burned when gas fees reached around 100 gwei. This decrease in activity results in an increase in the rate of inflation on the Ethereum network, where more ETH is being issued than is being burned.

Read Also: Number of New Ethereum Wallet Addresses Is at Lowest Point This Year 

Impact of Reducing Gas Costs

This reduction in gas costs did not just happen. There are several factors that contribute to these falling costs. One of them is the migration of users to Layer 2 solutions, which allows transactions to be carried out at lower costs. 

Layer 2 solutions such as Decision and Optimism have become increasingly popular because they offer higher transaction speeds with lower fees compared to direct transactions on Ethereum's Layer 1.

In addition, the Dencun upgrade introduced in March 2024 also plays a role in lowering transaction costs. This enhancement introduces blob transactions that help reduce costs on the Layer 2 network, indirectly as well influence gas fees on Layer 1 Ethereum.

Ethereum Needs to Raise Gas Limits?

With the rising rate of inflation and low ETH burning rate, some experts in the blockchain industry have raised concerns. Martin Köppelmann, founder of Gnosis, suggested that the gas limit be temporarily increased to offset existing staking rewards. 

According to him, the base fee is currently at a multi-year low of around 0.8 gwei, while to offset the staking rewards a fee of 23.9 gwei is required. 

Köppelmann argues that Ethereum needs to ramp back up activity at Layer 1, and while it may sound contradictory, increasing the gas limit could be part of the strategy to achieve that goal.

 Read Also: Ethereum Support Level is at $2,314 to $2,435

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