At 20:34 on August 5th, the block height of the Ethereum network reached 12,965,000, and the London upgrade was officially launched! This is an upgrade that has attracted the attention of the Ethereum community. With the smooth completion of the upgrade and the continuous increase in the amount of ETH burned by the network, the Ethereum community cheered for joy. V God and some core community members also smiled in the Youtube live broadcast room and watched the live broadcast. Fans of consciously and excitedly put “ETH TO THE MOON” on the public screen.
The deployment of EIP1559 has gone smoothly for the past week, and now may be a good time for us to review the changes in various data fundamentals of the Ethereum ecosystem at this stage.
” Data insight after EIP1559 deployment”
1. Total burnt amount & value
As of 20:34 on August 12, EIP1559 was deployed for exactly one week. During this week, the Ethereum network burned about 32,000 ETH, worth about 100 million U.S. dollars.
The destruction of such an astonishing amount/value in a week has also made many people look at ETH more.
But what you need to know is that after EIP1559 is deployed, in order to keep the Ethereum block capacity at 15M Gas, miners need to increase the Gas Limit to 30M. After the upgrade was completed, some miners still did not adjust this parameter in time, which caused the gas price at that time to be slightly higher and the destruction speed to be faster. Nearly 2000 ETH has been destroyed.
2. Historical trend: ETH burn volume, average gas price, ETH additional issuance rate
Next, let’s take a comprehensive look at the “ETH burn trend”, “average Gas price trend” and “ETH increase rate trend” of the Ethereum network in the week after the deployment of EIP1559 is completed.
ETH destruction trend | Source: Dune Analytics
Average Gas Price Trend | Source: Dune Analytics
Trends in the issuance rate of online ETH | Source: Dune Analytics
Based on the above picture, we can understand that in this week, in general:
The base fee of the network fluctuates in the range of 30 to 60 Gwei; the average gas fee fluctuates in the range of 35 to 70 Gwei; combined, it can be seen that the network transaction tip (Tip) fluctuates in the range of 5 to 10 Gwei.
The average burn rate of ETH is almost 150 ETH per hour, which is about 3,600 ETH per day. Derive the formula for the amount of destruction based on the average basic cost (x Gwei ⇒ x*100 ETH/day), that is, the average basic cost is about 36 Gwei.
Eric Conner, the core developer of Ethereum and co-author of EIP-1559, previously stated that EIP-1559 will reduce the annual inflation rate of Ethereum from 4.2% to 2.6%. It is worth mentioning that from the ETH issuance trend chart, we can know that ETH has entered a deflationary state in the previous three moments.
Of course, the main reason is that the skyrocketing gas price of the network causes the block reward of some blocks to be less than the basic handling fee for burning in the block, and this instantaneous gas price is actually mainly caused by crazy NFT buying.
Take the first peak in the ETH issuance rate chart as an example. It was about 1 am on August 6, that is, within 4 hours after the deployment of EIP1559, the basic cost of the Ethereum network soared to 207 Gwei. According to the fee model, the Gas Price has soared to 400 Gwei, and the instigator behind it is driven by the crazy preemptive casting of the NFT project COVIDPunks, and within a single hour, the Gas fee consumed by the COVIDPunks project has been allocated to the Ethereum network. In the first place, a total of nearly 663 ETH was spent.
COVIDPunks ranks first in fee consumption | Source: etherscan.io
3. Ethereum economic data we can expect after EIP1559
Speaking of the inflation issuance of ETH, I have to mention here on August 8th Ethereum 2.0 researcher Justin Ðrake’s “Ethereum related economic predictions after the launch of EIP1559”:
Justin Ðrake predicted three possible time points for PoS mergers: an optimistic estimate is February 1, 2022, the highest probability is March 1, 2022, and a conservative estimate is April 1, 2022.
In addition, combined with EIP1559’s handling fee destruction and the relevant economic parameters after the PoS merger, Justin Ðrake predicts that in an ideal state, the upper limit of the supply of ETH in the future may be 120 million, and under the destruction of EIP1559, ETH is expected to achieve deflation. The total supply was reduced to 100 million during the year. And under the integration of PoS issuance and fee income, the annualized rate of return for participating in ETH2.0 pledge is expected to be 8.4~19.8%.
Justin Ðrake’s economic prediction on Ethereum after EIP1559 goes online
4. Proportion of EIP1559 transactions: Are transactions not necessarily all EIP1559 fee models?
First of all, we need to know that after the London upgrade is completed, the Ethereum mainnet is still backward compatible with the old transaction format. The Gas price in the old transaction format will automatically be converted to the “basic fee + tip” format, and the gas price will be fully paid. The rest of the fee will be paid to the miner as a tip. (Regardless of whether so many tips are required, the fees paid by the old model may be higher.)
From the above figure, we can know that in fact, the indicator of “EIP1559 Transaction Proportion” fluctuates greatly, but in general, “EIP1559 Transaction Proportion” is concentrated in the range of 5-20%, especially in the early stage, the proportion is basically lower than 5. %, the proportion gradually rises in the future.
This is not difficult to understand. Due to the backward compatibility of handling fees, some wallet manufacturers have not yet launched to update the EIP1559 handling fee model. As subsequent updates follow up, the proportion of transactions will naturally gradually increase.
” EIP1559 Community View”
Regarding the deployment of EIP1559, there are those who like it and those who oppose it. In addition to direct stakeholders such as miners, the opponents also include members of the Ethereum community based on economic theory (here represented by Mr. Ajian, the principal of Ethereum enthusiasts).
The core and relevant points of supporters are basically as follows (basically the benefits of EIP1559):
Optimize user experience: realize the stability and predictability of transaction fees on the Ethereum network.
The design of the basic fee can solve the problem of “economic abstraction”: before the transaction fee was zero or the fee was not in the form of ETH tokens, miners can also package (bribery will compensate miners in other forms); but the current EIP1559 procedure Fee model, the transaction must include the basic handling fee.
Improve the ETH token economic model: Previously, ETH was only used as a utility token, acting as a fee in the Ethereum ecosystem. Even because of its base currency status, it can indirectly capture some currency premiums, but it cannot directly capture the development of the Ethereum ecosystem. However, the design of destroying the basic fee can improve this defect. The more prosperous the ecology, the more ETH fee will be destroyed, forming a virtuous circle and completing the value capture of ETH tokens.
All in all, burning ETH can reduce circulation and benefit ETH holders, so the community is basically very supportive.
The core and relevant views of the opponents are basically as follows:
The essence of depriving miners of basic fees is a kind of compulsory taxation, which does not conform to basic economic principles and is a long-term hidden danger.
EIP-1559 actually cannot achieve its vision and goals, but will introduce unnecessary attributes to the system.
The existence of pros and cons is actually a fortunate thing, so that we can avoid being too blind. Of course, for EIP1559, most people in the community support, especially now that EIP1559 has been deployed, then we must at least understand the arguments of the opponents, observe and remind in practice, after all, all this is an experiment, no one can guarantee 100% success.
” Recent Ethereum Ecological Insights “
1. NFT + GameFi dominates the network
With the popularity of NFT chain games represented by Axie Infinity, the NFT trading market has become active again, and data fundamentals have reached a record high. Driven by the NFT + GameFi boom, the Ethereum ecosystem has gotten rid of the previous “bear market atmosphere”.
In terms of currency prices, as of the time of the author’s writing, ETH has risen from the previous low of $1700 all the way to around $3200, which is nearly doubled. With the help of the daily stimulant destruction of about 3,600 ETH, the market is optimistic about the market outlook again.
As the current NFT trading market OpenSea is basically the main battlefield of NFT trading (market share in July was as high as 96.3%), we can get a glimpse of the popularity of the NFT market from OpenSea’s recent data fundamentals.
In July, OpenSea’s monthly transaction volume exceeded 300 million U.S. dollars, monthly NFT sales exceeded 450,000, and monthly fee income exceeded 20 million U.S. dollars. These three data indicators are more than twice the average data results of the past single month.
In August, as of August 11, OpenSea’s transaction volume has exceeded twice the total transaction volume in July. In these 11 days, the number of active users of OpenSea has far exceeded the total active users in July, with more than 80,000 active users. user. At present, the total number of trading users in the OpenSea trading market has exceeded 200,000.
OpenSea Monthly Trading Volume | Source: Dune Analytics
After the deployment of EIP1559, OpeaSea basically ranked first in the ETH burn contribution rankings in the Ethereum network.
2. Options call & trading sentiment heats up
On the eve of the London upgrade, the holdings and trading volume of ETH open positions increased significantly. In addition, the vast majority of ETH option transactions were call options, and this bullish sentiment was not a short-term speculative call promoted by EIP1559.
According to Deribit data, on August 6, the volume of Ethereum call options with expiration date of March 25 of the following year soared, reaching 27,870, with a nominal value of $77,702,396.1. Among them, the largest number of call options expired on March 25 of the following year. The exercise prices of call options were $50000 and $40000, and 12,764 and 12,509 call options were traded respectively.
According to Alternative data, the market has gradually stepped out of the panic sentiment zone in the past month, and is currently in the greed sentiment zone.
Market greed and panic sentiment trend | Source: alternative.me
3. EIP1559, assists Ethereum to surpass Bitcoin?
The superior performance of ETH in all aspects this year has strengthened the narrative of “Ethereum surpassing Bitcoin”.
The current annual inflation rate of Bitcoin is about 1.8%, while the current inflation rate of Ethereum has been reduced to about 2.6%. After the implementation of PoS in the future, it is more likely to achieve a supply ceiling or even deflation. Moreover, with such a strong ecological bonus of Ethereum, it seems to some people that it is no longer a fantasy for Ethereum to surpass Bitcoin.
However, as of the time of writing, the ETH-BTC exchange rate fluctuates around 0.07. If the market value of Ethereum wants to surpass Bitcoin, the exchange rate must rise by at least 129% to 0.16045.
EIP1559 has been deployed. With the continuous destruction of ETH and the prosperity of the Ethereum ecosystem, will the story of Ethereum surpassing Bitcoin really come true when it transitions to the PoS merger?
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