After introducing the new transaction fee burning mechanism, Ethereum (ETH) network's latest upgrade, London hard fork went live on Aug. 5 and burned 5,093 ETH, which is exactly $14,178,349 at the time of this writing.
The largely anticipated London hard fork, particularly EIP-1559, was a historical event in the cryptosphere that changed the mechanism for which transaction fees are processed. At block height 12,965,000, the upgrade went through successfully. Within a few hours, the amount of ETH being burned started to escalate and it doesn't seem to be decelerating.
EIP-1559 upgrade is designed to make fees easier to use and scale the high demand.
Requiring a base fee to be burned, users are able to tip miners if they want to encourage their transactions to go through quicker. The base fee rises when there's higher demand and drops when the demand is lower. Despite the contention the new upgrade faced with miners, 2 ETH is rewarded to miners after every block for helping to run the network and can receive tips from Ethereum users on top of their base fee.
However, this doesn't mean that they don't feel the brunt of the work being put in to maintain the network working smoothly. In contrast to recent months, transaction fees rose so high that they accounted for 50 percent of miner revenue (equaling about 1 ETH per block). Now with base fees getting burned, miners miss out on the opportunity for this big source of revenue. To make up for it, Ethereum users would end up paying high transaction fees on top of the base fees to make up the difference or tip.
Does the burning make Ethereum deflationary?
While many crypto natives and "ethereum maximalists" will go as far to call Ethereum "sound money" and believe this upgrade will make ETH deflationary, other experts don't share the same sentiments. Currently reducing the amount of inflation by 36 percent simply helps slow down the increase circulating supply over time in which case, the rate might change greatly over time. However, with much anticipation and many people believing that this would make the cryptocurrency deflationary, it has driven up the price.
With EIP-1559 live now, many people are waiting for the next biggest upgrade, EIP-3675.
Ethereum's transactional utility makes it possible that scarcity occurs during the fee burn. ETH's supply decreased when more ETH is destroyed via fee burn than ETH being created via issuance. With the activation of EIP-1559, many people are speculating about the impact of EIP-3675, which won't be released until next year.
EIP-3675, dubbed as "The Merge," will be the swapping of heavy issuance PoW (Proof-of-Work) with the lesser insurance mechanism PoS (Proof-of-Stake). With the network, steadily and diligently working on EIPs (Ethereum Improvement Protocols), holders are benefiting from the latest upgrade's impact on price. Amid this historical event in the cryptosphere, the verdict of the senate's infrastructure bill is still looming and could hinder any other protocol improvements.