Ethereum network burns $395K ETH per hour after London upgrade

Approximately 2.3 ETH is being burnt every minute through the new transaction fee mechanism introduced in Ethereum’s London upgrade on August 5.

The highly anticipated London hard fork went live on Wednesday this week, ushering in the EIP-1559 upgrade that adjusted gas fees. Part of that adjustment introduced a mechanism that burns some of the base fees collected.

The total amount of ETH burnt since the upgrade went live around 14 hours ago is roughly 3,395 ETH according to the various counters available. Etherchain reports an average burn rate of 2.36 ETH per minute. This equates to $6,596 per minute, or around $395,000 of ETH going up in metaphorical smoke every hour at current prices.

An alternative counter called Ultrasound.money reports a total burn of 3,390 ETH worth a whopping $9.5 million at the current ETH price around $2,800. The tracker reports that the popular NFT marketplace OpenSea is the top ETH burner with 374 ETH, or just over $1 milliondollars, destroyed since the upgrade was launched.

In second place was Uniswap’s version 2 which had burned 263 ETH, or $740,000, at the time of writing. Uniswap founder, Hayden Adams, commented on the burn rate stating that if things continue at the same rate, the protocol could burn as much as 350,000 ETH, or almost $1 billion per year.

The Bankless DeFi newsletter threw around some figures in an attempt to predict the impact on future supply. Since the base fee is anywhere between 25% and 75% of the total transaction fee, manual calculation and predictions are difficult.

It modeled burn rates within this range using data on fees generated in 2021 and concluded:

“Annualizing these figures, this means that between 800,000 — 2.4 million ETH is projected to be burned in 2021.”

When combined with the reduction in block reward issuance from the merge to proof-of-stake, the fee burning could lead to Ethereum having a deflationary supply, which would see it fulfill the increasingly used meme of “ultrasound money”.