Since the Ethereum Merge (Sept 2022), ETH burns more coins than it creates during high-network activity. Less supply + growing demand = long-term price upward pressure. Here's how the burn works.
EIP-1559 (August 2021) changed how Ethereum gas fees work. Instead of all fees going to miners, a BASE FEE is now burned (permanently removed from supply). Only a tip goes to validators. Every time you use Ethereum or an L2 that settles to Ethereum, a portion of ETH is destroyed forever. The more Ethereum is used, the more ETH is burned.
After the Merge, ETH issuance dropped 90% (from ~13,000 ETH/day to ~1,700 ETH/day). During high-activity periods (DeFi surge, NFT mania), the burn rate exceeds issuance — NET NEGATIVE supply. In 2024, during peak L2 activity, Ethereum was burning 1,800-2,200 ETH/day vs 1,700 issued. Net deflation: -100 to -500 ETH/day.
Bitcoin has a fixed supply (21M max) and uses halving to reduce new supply. Ethereum's supply is dynamic — it actually decreases during high activity. Total ETH supply peaked at ~120M and has been slowly declining since the Merge. Unlike Bitcoin's fixed schedule, Ethereum's deflation is demand-driven: more usage = more burn = more scarce. Usage = value.
Since the Merge (Sep 2022): ~1.8M ETH burned and not replaced (~$6.3B at current prices). ETH supply: ~120M (vs 120.5M at Merge). The supply reduction is modest but growing. When the next high-activity bull cycle peaks, the burn rate will likely significantly exceed issuance again — accelerating deflation. This is structural support for ETH's long-term price.
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