Bitcoin News Australia

gm readers and welcome back to another edition of Decrypting DeFi.

Over the past week, Ethereum is burning hotter than ever.

As part of Ethereum Improvement Proposal (EIP) 1559, launched all the way back in August 2021, the protocol has been burning (crypto lingo for destroying) ETH at a massive rate.

As per this implementation, a portion of all Ethereum transactions are destroyed: a piece of every NFT trade, yield strategy, and even simple token transfers. It’s all getting torched.

In the last seven days, the Ethereum protocol has destroyed more than 16,364 ETH at an estimated rate of 1.62 ETH per minute, according to Ultrasound Money. More on what ultrasound money means in just a minute.

Since that EIP was implemented, a total of 2.8 million ETH has been removed from circulation, or roughly $4.3 billion at today’s prices. It’s a massive amount, for sure.

Second, this burn mechanism also means that there is more Ethereum being destroyed than being issued to miners.

Supply growth has now dropped to -1.06% per year since EIP 1559. This makes Ethereum more deflationary than Bitcoin, which was heralded as the original sound money (hence the use of the ultrasound money meme by ETH heads).

The below chart shows how the network’s token supply has changed over various checkpoints and upgrades.

The dotted portion suggests that the deflationary trend is expected to continue over the next two years.

ETH supply projections. Source: Ultrasound Money.

The only real reason that this projection wouldn’t be fulfilled is because ETH adoption and usage falls off a cliff. Remember: With every transaction on the network, ETH is burned. 

In this way, we might use this burn rate as another way to measure adoption for the network.

 So, which use categories (as defined by Ultrasound Money) are leading adoption on Ethereum?

Over the past week, NFT and DeFi activity have been the key fuel for Ethereum’s flame. 

These two categories has been responsible for the destruction of more than 8,000 ETH this week, with market leaders of each category—OpenSea (~1,377 ETH) and Uniswap V3 (~1,094 ETH)—being the key drivers of that. 

This metric also gives us a touch more insight into the stablecoin battle between USDT and USDC. We all know that the former’s market cap is still miles ahead of the latter’s, but Tether’s offering is also responsible for more than three times the amount of Ethereum being burned. 

USDT transfers burned roughly 750 ETH this week, while USDC transfers burned just 239 ETH. In other words, USDT continues to lead usage in terms of stablecoin adoption on Ethereum. 

– Liam Kelly, Europe News Editor (@Liam_Gallas)

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