Ethereum Inflation to Highest Levels Since EIP-1559 Implementation

Ethereum’s network activity has plunged considerably due to the market downturn as the decentralized finance (DeFi) and NFT sectors took a hit.

Gas prices weren’t spared either. In fact, new data suggested that these figures have reached multi-year lows and are now treading near May 2020 levels.

With Ethereum fees dropping below $5 per transaction, ETH burned by EIP-1559 has hit an all-time low. Furthermore, only a mere 11% of minted issuance has been burned from circulation.
This is the most inflationary ETH has been since EIP-1559 went live., as pointed out by Glassnode’s lead researcher.

Gas prices for #Ethereum are at multi year lows, now back to May 2020 levels.

As a result, $ETH burned by EIP1559 is at an all time low, with just 11% of minted issuance being burned.

This is the most inflationary ETH has been since EIP1559 went live.

— _Checkɱate (@_Checkmatey_) July 31, 2022

Ethereum adopted burn mechanics as a means to help transition users over to its new proof-of-stake (PoS) network from the current proof-of-work (PoW).
The EIP-1559 update was introduced last summer, and it essentially burns Ethereum gathered from fees associated with verifying transactions on the network.
The aim of the burn mechanism was to make Ethereum deflationary. However, the high issuance rate has prompted the network to go in a different direction.
The Ethereum’s long-awaited “Merge” upgrade, on the other hand, is expected to deflate the supply with the help of EIP-1559 by burning ETH.
IntoTheBlock research director Lucas Outumuro believes that Ethereum’s net issuance will be confined within the 0.5% to 4.5% range based on network fees following the merge.
As per the exec’s findings based on historical data, the net issuance of ETH will decline, prompting a price rally as its circulating supply goes down. He added,

“ETH will become deflationary following the merge.”

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