Ethereum sees first consecutive week of deflationary issuance

The Ethereum network has seen consecutive weekly negative supply issuances as a frothy market drives persistently high transaction fees.

With the much-anticipated London upgrade introducing the burn mechanism to ethereum’s fee market in early August, every transaction executed on the ethereum network has since seen a small amount of ether burnt.

Ethereum has seen network deflationary issuance for seven consecutive days as gas prices remain high, meaning more ETH is being removed from supply than is being created through mining. In order for Ethereum to continue to generate deflationary blocks, the gas price must remain above approximately 150gwei.

EthHub co-founder Anthony Sassano commented that a deflationary Ethereum won’t happen until a “merge” — where the Ethereum blockchain will merge with Eth2’s beacon chain, currently expected in the first half of 2022.

According to the Ultrasound.Money burn tracker, roughly 15,000 ETH ($65 million at current prices) are burned every day. If you factor in the rate at which new ETH is being created, WatchtheBurn reports a weekly net issuance of negative 8,034 ETH (roughly $34 million) at the time of writing.

Since the London upgrade, more than 724,400 ETH worth $3.1 billion have been permanently destroyed.

According to Etherscan, the average cost of an ERC-20 token transfer is now a painful $46. Doing something more complex like providing liquidity to a DeFi protocol or doing a token swap on Uniswap can currently cost as much as $140.

Sassano emphasized that the upgrade does not increase gas prices, but rather makes them more predictable. “Contrary to popular belief, EIP-1559 did not increase gas prices and in fact helped a lot with demand spikes (such as during NFT minting hype), which resulted in an overall smoother network,” he said.

According to the Bankless Ethereum third-quarter network report, the transaction volume settled from July to September this year reached as high as $536.5 billion, an increase of nearly 400% over the same period last year.

Despite ethereum's first deflationary week, many ethereum advocates are trying to encourage users to migrate to transacting using its nascent second-layer ecosystem.

According to L2beat, the total value locked in various L2 networks reached a record $4.68 billion. This TVL has surged nearly 500% in the past two months as ethereum users increasingly seek ways to avoid those excruciating transaction fees.