Ether, the native token of Ethereum’s blockchain, looks to have become more scarce than bitcoin since the activation of Ethereum Improvement Proposal (EIP) 1559.
Data tweeted by Lucas Outumuro, head of research at blockchain analytics firm IntoTheBlock, shows ether’s daily annualized net issuance fell to 1.11% earlier this week versus bitcoin’s 1.75%.
Daily issuance refers to the number of coins mined. In the case of ether, the figure is adjusted for the amount of ether burned.
EIP 1559, which went live on Aug. 5, burns a portion of fees paid to the miners, removing a notable chunk of coins from circulation. Since activation, the upgrade has eliminated over 100,000 ETH, representing 36% of the new coins issued over the same period, according to data source Etherchain.
The amount of ether burned is tied to network usage, which has surged in the past two weeks, thanks to the boom in the non-fungible tokens (NFT) space. According to Dune Analytics, NFT marketplace OpenSea is the biggest ether burner to date, having destroyed 15,697 ETH, an equivalent of $49 million at ether’s current price of $3,120. Other top contributors are decentralized finance protocol Uniswap, stablecoin issuer Tether and NFT game Axie Infinity.
Such has been the frenzy that ether became a deflationary asset, with the number of coins burnt being higher than issued, on several occasions in the past two weeks.
If the trend continues, ether could attract store-of-value demand, which until now has been concentrated mainly toward bitcoin. The pace of bitcoin’s supply expansion is reduced by 50% every four years by a programmed code called the mining reward halving.
“Ether’s decreasing issuance raises questions about how it is valued,” Outumuro tweeted. “Previously closer to digital oil, ETH’s value moved in tandem with its usage; now that its issuance is probably lower (and potentially deflationary), it is likely to develop a monetary premium like BTC.”
Ether is currently priced at $3,110, and bitcoin is changing hands near $47,200, according to CoinDesk 20 data. The ether-bitcoin (ETH/BTC) exchange rate is 0.065 on Binance, having rallied from 0.057 to 0.073 in the days leading up to the EIP 1559 release.
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