Ethereum becoming scarcer with EIP1559
Bitcoin taught us to appreciate scarcity, which becomes increasingly important when fiat money-printing machines go brrrrrr non-stop. Ether was conceived differently, without a hard cap and positioned as a “world computer” rather than a “world money”. However, Ethereum development is going in the scarcity direction, making it even more valuable ?
Programmed initially to produce 5 ETH/block, this reward was decreased to 3 ETH, and then 2 ETH as part of the protocol upgrades. The recent London fork containing the EIP1559 continued the decreasing trend in a different manner.
Starting from August 5th the miners’ fees are calculated differently: instead of users bidding for blockspace with a solid fee, it is now separated in two parts – the “base fee” (determined algorithmically) and the “priority fee” (set by users). The base fees, fluctuating from 25% to 75% of the total, are being burned with each transaction.
So how would this impact ETH inflation? It is currently at 3.33%, set to increase the overall yearly supply from 114M to 117.9M. As calculated by Bankless, with EIP1559, 2172 to 6511 ETH could be burnt daily, decreasing the inflation rate to 1.26%-2.66% depending on the network activity. In the best-case scenario, Ether’s inflation could be even lower than the current Bitcoin’s (1.77%).
Since the London fork over 13k ETH have been forever burnt (Etherchain), increasing Ethereum scarcity and desirability. ETH 2.0 could take it even further, so make sure you have some for the future ?
