Ethereum (ETH) witnessed a significant decline in daily ETH burned, hitting a yearly low primarily due to decreased gas fees. Gas fees currently range between 5 and 10 gwei, marking one of the lowest levels observed this year.
The Ethereum network experiences a notable decrease in the daily volume of ETH burned, reaching its lowest point this year, largely influenced by a recent decline in average gas fees. Presently, gas fees fluctuate between 5 and 10 gwei, representing one of the lowest levels recorded year-to-date and impacting ETH issuance.
The reduction in network fees translates to a decrease in ETH burned. On Sunday, only 610 ETH were burned, marking a record low for the year, while Ethereum’s gas fees remained minimal. In contrast, the daily volume of ETH burned during the first four months of this year consistently exceeded 2,500–3,000 ETH.
The ongoing decline in gas fees is attributed partly to a shift in activity towards Layer 2 scaling solutions and the increasing adoption of blob transactions introduced with the Dencun upgrade in March, which helps alleviate transaction costs on Layer 2s.
The dynamics of gas fees and ETH burning are closely monitored aspects of the network’s economic model. While low fees benefit network users, the recent decrease in ETH burn impacts Ethereum’s deflationary characteristics.
The London hard fork, also known as EIP-1559, implemented in August 2021, fundamentally altered Ethereum’s fee structure. The upgrade introduced a base fee that is burned and a priority fee acting as a tip to validators. As the base fee correlates with network usage, higher fees result in a greater amount of ETH being removed from circulation through burning.
In the past week, Ethereum’s supply has turned inflationary, with a growth rate of 0.49%, contrasting its previous deflationary trend, as reported by ultrasound.money. If activity surges and more ETH is burned than issued, Ethereum will return to a deflationary state.
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Source: https://cryptocurrencynews.com/yearly-low-ethereums-gas-fees-drive-eth-burn/
