Over the last couple of weeks, Ethereum saw roughly $63 million worth of ETH disappear from circulation. This drop in available Ether comes as gas fees shot up, increasing the rate at which Ethereum is being burnt.
According to data from Ultra Sound Money, there’s now less than 120.16 million Ether available, with over 21,000 ETH (equivalent to $62.8 million) going up in smoke during the past fortnight. Since the implementation of Ethereum’s Shanghai upgrade, also known as The Merge, in September 2022, Ether’s supply has dwindled by 362,628 ETH.
The Shanghai upgrade moved Ethereum to Proof of Stake consensus, which drastically slashed new Ether issuance by about 90%. Despite over 1.05 million ETH being added through rewards for stakers post-Merge, Ethereum’s burn mechanism has permanently removed over 1.4 million ETH during the same timeframe.
The surge in transaction fees is linked to a rise in decentralized exchange (DEX) trading volumes amidst bullish sentiment in the crypto markets, alongside heightened activity in NFT sales and on Layer 2 networks.
DEXes have handled trades exceeding $5 billion in the last 24 hours, a 134% increase since February 4th, as reported by DeFi Llama. Concurrently, NFT trading volume soared to $33 million on February 19th, marking a 114% surge since February 2nd, according to data from Dune Analytics.
Activity on Layer 2 networks is also heating up, contributing to congestion on the Ethereum mainnet as L2 transactions are finalized on the base layer. Data from L2beat reveals that combined Layer 2 throughput hit its second-highest level on record during February 17th and 18th, with L2s processing more than 92.4 transactions per second on average.
Average transaction fees have doubled over the past three days, according to Etherscan.
The spike in gas fees is partly attributed to the introduction of the ERC-404 token standard in early February. ERC-404 enables NFT fractionalization, resulting in gas-intensive transactions due to its utilization of both ERC-20 and ERC-721 tokens.
“ERC-404 allows multiple wallets to claim ownership of a single NFT – in other words, fractionalizing the ownership of the token,” explained Alun Evans, the CEO and co-founder of Laos Network. “This ties in neatly with the recent interest in the tokenization of Real-World Assets, as it leads to concepts of fractionalized ownership of high-value RWA such as real estate and art… hence the rush to adopt it, which has resulted in the spike in gas prices.”
PANDORA, an ERC-404 token, surged 5,000% within one week after its launch on February 2nd, indicating significant interest in the new standard. Ethereum’s average daily transaction fees hit $71.42 two weeks ago — its highest level since May 2023.
Recently, Cygaar, a pseudonymous developer, unveiled DN-404, a token standard aimed at enhancing the efficiency of transactions built on ERC-404.
“The DN-404 proposal, which uses twinned ERC-20 and ERC-721 contracts, claims to reduce the gas costs of ERC-404 by 20%, while also claiming enhanced security,” noted Alun.
