Just 26 days after the Ethereum Improvement Proposal 1559 (EIP-1559) and London upgrade were enacted, over 147,000 ETH or over $504 million have been burnt. Leading NFT marketplace OpenSea is responsible for $78.6 million whilst the leading Ethereum DEX Uniswap accounts for 12,874 ETH or just over $46 million.
The network upgrade in early August altered the way the Ethereum blockchain handles transaction fees. Now a portion of those fees is being burned. For decentralized applications, the upgrade potentially means a more stable and cost-effective network on which to operate and launch dapps.
Additionally, a price rally for Ethereum could have a positive impact on dapps in certain sectors such as DeFi, NFTs, and play-to-earn games. Moreover, we want to assess which projects are responsible for burning the most ETH and which category they belong to, for example, DeFi or NFTs. So as to form a better picture of blockchain activity right now.
One key metric in most people’s minds is burnt fees. In the first 25 days since the update, Ethereum already burnt over 147.391 ETH, or approximately $504 million. It has burnt ETH at a rate of 3.94 ETH per minute with the largest burn being 73.46 ETH.
We name contracts that use the most gas as gas guzzlers. Importantly, post-upgrade, we expected to see many of the popular protocols here such as Uniswap as they have always been gas guzzlers. What we didn’t envisage is that some brand new NFT projects would pop up alongside them, in some cases burning as much ETH as them over shorter periods of time.
Looking at the nature of the services offered by these dapp contracts, we see that OpenSea and NFTs lead the way, followed very closely by Uniswap, a decentralized exchange (DEX). Perhaps surprisingly to some Axie Infinity is riding high in 5th position having already burnt over 6k ETH. As seen, the top 5 addresses make up the lion’s share of top gas guzzlers burning ETH and provide a solid understanding of what the Ethereum network is most widely used for right now.
Instantly, we see that NFTs are leading the charge. The total ETH burned through the leading NFT marketplace now stands 23,009 ETH or just over $78 million at the time of writing.
Interestingly we see individual NFT collections appearing as they mint and burn ETH, for example, projects such as Adam Bomb Squad. Moreover, we can split the top 10 ETH burning protocols into two very clear categories: DeFi and NFTs. This speaks volumes for the current market conditions as we find ourselves in the midst of an NFT wave that is seemingly relentless.
EIP–1559 changed the transaction mechanism in Ethereum. From a first-price auction to relying on a protocol base fee plus user-selected priority fee. Contrary to popular belief, EIP-1559 will not necessarily result in lower gas fees. What it does provide is a better gas price estimation by updating protocol base fees. Nonetheless, what we are observing is high gas fees across the board. For both a low or high-priority transaction with more complex Uniswap transactions costing up to $42. It appears Ethereum is still suffering from network congestion. This time added to by the growing NFT movement as top of the DeFi sector.
The hype around NFTs right now, especially the collections arriving on Ethereum, is palpable. As mentioned above, NFT projects are popping up every week and they expend a certain portion of gas to mint their collections. More gas is then used during sale and transfer transactions.
Therefore it is no surprise that these new collections are responsible for the gas fee hike we are seeing. A quick look at the 7-day burn table reveals that several new NFT collections have arrived and are responsible for burning considerable amounts of ETH. Namely, Adam Bomb Squad, Creature World, and Fang Gang and Fatales. Moreover, we expect new NFT collections to keep arriving week after week adding serious fuel to the Ethereum burn rate.
Finally, and perhaps most importantly to some, is what effect the upgrade had on the token price of Ethereum. In the last 30-days, the price of ETH has increased by 34.5% from $2,598 to $3,427 at the time of writing. Not surprising really as London has long been discussed as the most important change to the Ethereum Network in its 6-year life span.
One year ago all the headlines were about DeFi dapps. Now, through the lens of the Ethereum burn rate, we see that the landscape has altered massively. The fact that OpenSea is sitting atop the top 10 list by such a gulf speaks volumes. NFTs are certainly the talk of the town as people come to understand that in reality, they represent a new asset class similar to standard cryptocurrencies. One that is perhaps in its boom phase, providing hungry, but most of all savvy investors with a means to make a profit.