Ether has turned deflationary as the gas fees hit 15 gwei amid the most recent price rally. This happens months ahead of the much-anticipated Shanghai upgrade, which promises to enable ETH stakers to withdraw from the Beacon Depositor Contract.
- Data from ultrasound.money reveals that ETH has turned deflationary once again. This happens for the first time since December 1st.
- There’s currently around 30 less ETH than there was in circulation back when the Merge took place last year, effectively making Ether a deflationary cryptocurrency, at least for the time being.
- The reason this is possible is because of the network’s transition to Proof-of-Stake, as well as the implementation of the EIP 1559.
- EIP 1559 was introduced back in 2022, and it activated a burn mechanism, which destroys ETH gathered from fees that are associated with verifying transactions on the network. The higher the fees, the higher the burn rate.
- Now that Ethereum no longer runs on the Proof-of-Work consensus algorithm, the issuance of fresh ETH has diminished tremendously and coupled with the ETH burned as a result of EIP-1559, the cryptocurrency has temporarily turned deflationary.
- It’s also worth noting that this takes place a couple of months before the release of the Shanghai upgrade. It is expected to hit the public testnet in February and the mainnet in March.
- The upgrade is promised to enable ETH stakers to withdraw from the Beacon Depositor Contract.