$ETH Ethereum has burnt $12.7bn since the London hard fork. But that may be slowing down

It's been 1,000 days since Ethereum first started burning transaction fees.But the mechanism, which offsets new tokens issued on the network, is slowing down.More efficient transactions, an explosion of activity on layer 2 networks, and the recent Dencun upgrade have all helped reduce the amount of Ether the network burns.

With the implementation of an upgrade known as EIP-1559 as part of the London hard fork in August 2021, Ethereum became the first blockchain to start burning a portion of the fees users spend on transactions.

That was 1,000 days ago.

The move, the blockchain’s faithful hoped, would help counterbalance the issuance of new Ether tokens on the network, creating a more sustainable monetary policy.

And it worked. Over the following 1,000 days, Ethereum users have burnt some 4.3 million Ether, worth over $12.7 billion just by using the network.

When Etherum slashed Ether emissions by switching to a proof-of-stake consensus mechanism in September 2022, the network became deflationary — meaning more Ether was, on average, burned by the network than new Ether was issued.

But in recent months the rate at which Ethereum is burning tokens is slowing.

A combination of more efficient transactions, an explosion of activity on layer 2 networks, and the recent Dencun upgrade have all helped reduce transaction fees — and thus the amount of Ether the network burns.

The lower fees are great for users. But if Ethereum can’t attract enough activity to offset the drop, it could easily lose its deflationary status, potentially throwing its economic model into question.

Why is the burn slowing?

When Ethereum users transact on the network they must pay a fee denominated in Ether.

This fee is made up of two parts: a so-called base fee charged by the network, and a priority fee, paid to block builders as an incentive to get the transaction processed faster. Ethereum burns base fees, and gives priority fees to those processing transactions.