The multitude of activities occurring within the Ethereum blockchain is rubbing off on the amount spent on gas fees. An analysis reveals that over 90,000 ETH worth approximately $175 million has been burned in 19 days. This feat was previously achieved within 215 days. Here is the reason behind that.
Rise in MemeCoin Frenzy
The Ethereum network is home to numerous cryptocurrencies, especially those classified as memecoins. PEPE, a token named after the famous meme Pepe the Frog, alongside other tokens with little to no utility, topped the charts in the memecoin market.
For this reason, the blockchain sees a steady flow of transaction records every second. In some cases, these transactions are so many that they get congested, leading to increased gas fees.
These gas fees, which get paid to Ethereum validators, add to the total supply of the asset. To curb excess production of Ethereum’s native cryptocurrency, ether, a token burn model was brought into play.
A token burn is a process of removing a portion of a cryptocurrency from circulation. It involves sending the tokens to a burn wallet. The number of tokens burnt relies on the number of transactions and fees paid on the network. The goal is to increase the scarcity of the asset and theoretically increase its value.
ETH Price Movement
The recent token burn had a brief effect on the asset’s price. Ether’s price rose from $1,800 on the first day of the month to $2,000 a few days later, representing around a 10% increase. The second-leading cryptocurrency has dropped to a current trading price of $1,850.
Meanwhile, this is not the first time Ethereum will undergo a token burn. Last July, the network saw the removal of 2.5 million ETH worth nearly $3 billion at the time. Other cryptocurrencies like the Binance Coin (BNB) and PancakeSwap’s CAKE token, adopt a periodic token burn model to help bolster the asset.
