Ethereum saw no zero negative issuance days since February 1, according to the WatchTheBurn service. The drop also followed the rise in the net issuance in fees on Ethereum, showing the decreased usage of the network and a drop in the number of active wallets.
The burn rate of Ethereum is often used as an indication of the usage of the network since the amount of ETH burned on the market is proportional to the volume of fees paid by users.
With a strong decrease in the number of new NFT collections and DeFi projects on Ethereum, the network no longer remains congested; hence, enormous fees are no longer an issue for traders and users.
By implementing the EIP-1559 mechanism on the Ethereum network, the blockchain burns fees paid by users, which creates a deflationary effect: at some point, the circulating supply of Ether should begin slowly decreasing, which should positively affect the price.
According to various predictions, Ether could become a deflationary asset by the end of 2022, but the problem is that most of those predictions were made during the NFT and DeFi craze when users had to pay up to $100 in fees for one simple transaction.
Unfortunately, Ether is no longer used as actively as it was in 2021, which may create issues with the upcoming "deflation" of the network.
Valeria Blokhina
Vladislav Sopov
Alex Dovbnya
