Since the cryptocurrency network switched from a Proof-of-Work consensus algorithm to a Proof-of-Stake consensus algorithm, more than $100 million worth of Ethereum, the second-largest digital currency by market value, have been burnt.
The deflationary tendency of the cryptocurrency has been intensifying over time. Since the network's merging update 180 days ago, there are presently 120,456 ETH in circulation, a decrease in supply of about 64,457 ETH.
After the Merge, the supply of Ethereum has been decreasing by 0.1% year, when it would have been increasing by 3.42% annually without it, according to statistics from Ultrasound.money.
According to the website's predictions, the amount of Ethereum in circulation might decrease to 117 million ETH by 2025, with issuance benefits for network stakeholders anticipated to be about 4% annually. Transfers from important DeFi apps, such as Uniswap, Tether, and other projects burning tokens through transaction fees, can be held responsible for a sizeable amount of the ETH burn that led to the fall in supply.
With the London hard fork, which included the execution of EIP 1559, transactions began to consume ETH. The EIP altered how the network handles transaction fees. Instead of using an auction mechanism, users now pay a flat cost to validate their transactions, with the option to tip them to expedite the process.
Staking Ethereum has been viewed as a way for exchanges and cryptocurrency owners to make money. These services provide customers with a staking service that enables them to keep their ETH locked on-chain to earn incentives, retain liquidity through a different token, and get a portion of the earnings in return.
For instance, the Nasdaq-listed cryptocurrency exchange Coinbase reported income from its staking, earn, and custody offerings totaling more over $200 million in the fourth quarter of 2017.
Significantly, a final dress rehearsal was conducted on the Goerli testnet, which comprised a simulation of staked ETH withdrawals, bringing Ethereum's much awaited Shanghai upgrade one step closer to being triggered on the network's mainnet.
When it is turned on, Ethereum will have fully converted to a proof-of-stake (PoS) network, enabling validators to withdraw the ether they have pledged as well as any incentives they have received for adding or approving blocks.