ETH Burn Hits Lowest Level in 2023 Amid Decreased Network Activity

The amount of ETH burned through the EIP-1559 mechanism has dropped to its lowest point in 2023, indicating a significant slowdown in Ethereum network activities.

According to data from The Block, on August 12th, the amount of ETH burned was 570.54 ETH, the lowest since 2023 began. The closest lower figure was recorded on October 2nd, 2022, at 498.16 ETH.

Chart showing ETH burn over the years. Source: The Block

Since the Shanghai upgrade in April 2023, the Ethereum network has burned 460,031 ETH through transaction fees, while approximately 6 million ETH have been minted through staking. The dominance ratio during this period has pushed ETH's annual inflation rate down to -0.09%.

Ethereum introduced the coin-burning mechanism with the implementation of EIP-1559 in April 2021, aiming to balance gas fees paid by transaction senders. Under the previous model, validators were incentivized to prioritize high gas fees, leading to inefficiencies where users paid disproportionately high gas fees for transactions.

Ultrasound.money reports that over the past 30 days, more than 71,000 ETH in transaction fees have been burned, predominantly from ETH and stablecoin USDT transfers, DEX Uniswap, and layer-2 solutions like zkSync, Arbitrum, and Optimism.

ETH burned and the applications burning the most fees on Ethereum in the last 30 days. Source: Ultrasound.money

Ethereum reached milestones of 1 million ETH burned from EIP-1559 on November 24, 2021, 2 million ETH on March 21, 2022, and most recently, 3 million ETH on March 15, 2023. The intervals between each million burned have been increasing, reflecting reduced activity on the Ethereum network as users migrate to emerging layer-2 solutions.

Some argue that the gradual decrease in ETH burn is a positive development, correlating with reduced network congestion and lower gas fees.

ETH is currently priced at $1848 USD, with relatively muted market reaction to this news.

Price movement of ETH on a 1-day chart as of August 14, 2023, on Binance.