Crypto: $ 13.5 billion in burnt Ethereum, but the offer continues to climb

While we often praise Ethereum as an asset potentially deflationary, the reality of the protocol tells another story. Nearly 4.6 million ETH have been burned since 2021, the equivalent of $ 13.5 billion, without stopping the growth of the offer. An anomaly that questions the consistency and efficiency of the economic model implemented since the London update, and calls into question certain certainties on the programmed rarity of the assets.

A massive burn mechanism, but a limited effect on the offer

Since the implementation of the EIP-1559 on August 5, 2021, the Ethereum network has introduced a major monetary novelty: the automatic destruction of a portion of transaction costs, or “Burn”intended to reduce inflationary pressure on ETH's offer, while crypto has just crossed $ 3,000.

In 1,438 days, This mechanism brought to burn 4.6 million Ethor about $ 13.57 billion at the current market value. This represents an average of 2.22 ETH burned each minute, and this figure remains strongly correlated in terms of activity on the blockchain.

The applications and uses responsible for the majority of burnt ETH are well identified. Here are the main contributors, according to Ultrasound.Money data ::

• Classic ETH transactions: 375 959 ETH burns;
• OPENSEA (NFT): 230 051 ETH sent to Burn;
• The Uniswap V2 (DEX): 227,045 ETH destroyed;
• TETHER transfers (USDT): 210,070 ETH burnt.

This monetary mechanism, praised for its transparency and simplicity, does not however manage to compensate for the quantity of newly issued ETH. The burn depends closely on the level of use of the network: the more transactions, the more the quantity of destroyed eTh increases.

Conversely, during the lower activity period, mechanics shows its limits. The expected effect, reducing the global supply, therefore remains partially neutralized by a broadcast even greater than Burn Total since 2021.

Moderate, but persistent inflation: the paradox of Ethereum

Despite this massive destruction, the Ethereum network continues to emit more eTh than it burns. Thus, 3,695,537 ETH have been created from Hard Fork London, injecting approximately $ 10.89 billion of additional value in the ecosystem.

The rate of annual median inflation over the period reached 0.801 %, an almost equivalent level to that of bitcoin today (0.809 %)although clearly decreases compared to the old model of proof-of-work of Ethereum, which would have generated an inflation of 3.394 %.

This discrepancy between burn and monetary creation reveals a policy in unstable balance. The most recent weekly data, however, show a slight inflection: over seven days, the emission rate fell to 0.723 %, with 16,745 ETH newly created.

This development seems to be linked to a drop in network activity, and therefore to a lower pressure on burn. Contrary to the received idea according to which Ethereum is becoming “Deflationist”the reality is much more nuanced. The balance between burn and creation strongly depends on the volume of transactions and the use of the network by decentralized applications.

In the short term, this controlled inflation can appear as a viable compromise, guaranteeing sufficient incentives for validators while limiting dilution for holders. However, in the longer term, the maintenance of an inflationary offer, even moderate, could be problematic if the burn fails to keep the pace in times of low activity. It remains to be seen whether the protocol will be led to adjust its economic parameters or if it counts on the organic growth of the ecosystem to sustainably reverse the trend.