31st October 2021 > > EIP-1559.

tl;dr

ETH net issuance is turning negative.

Market Snap

Market Wrap

All quiet on the markets front, so over to Ark Invest for some recent insight of theirs into future price performance:

“In our view, Bitcoin’s value is a function of its economic utility, while bitcoin’s value is a function of its supply and demand. Over the short- to medium-term, we believe investors should be able to assess buyer and seller behavior (sic) on Bitcoin and use relative-value metrics to manage bitcoin positions actively”.

Eh?

Occasional Series – Insulate Britain

Diversity score remains firmly entrenched at … zero.

Curious Cryptos’ Commentary – ETH burn

As part of the move to ETH 2.0, proof-of-stake (POS), and sharding (see CCC 29th October 2021) a code upgrade known unglamorously as EIP-1559 introduced a process of burning ETH in each block back in August.

This is achieved by sending a proportion of the fees that used to accrue to miners to a wallet address for which the private keys have been destroyed.

The idea behind this was two-fold.

Firstly, it brings fees more in line with the costs associated with mining POS rather than mining POW (proof-of-work).

Secondly, it addresses a core criticism of ETH that because there is no upper limit to the creation and distribution of ETH (in stark contrast to the 21mm hard limit for BTC) then ETH is only ever inflationary, much like fiat.

Total ETH burned so far is 668,000 worth approximately $3bn out of a total market cap of $500bn.

At that rate, 2% of total supply would be burnt every year, give or take. This is similar in economics to gold. Every year, on average, 2% of the stock of gold above ground is mined and, on average, 2% of the stock of gold is lost or used in manufacturing.

On September 4th, the daily issuance of ETH went negative for the first time. That happened again on October 27th and October 28th.

There are many reasons why ETH is sitting around all-time highs (ATH). The potential for net negative issuance on a regular and sustained basis will only add more fuel to the price fire.