Burn Rate Surges Amid Spike In Ethereum On-Chain Activity

Nearly $63M worth of ETH was burned in the past two weeks.

By: Samuel Haig Loading...

Burn Rate Surges Amid Spike In Ethereum On-Chain Activity

The circulating supply of Ether is at a new post-merge low after a recent jump in gas fees pushed up Ethereum’s burn-rate.

Data from Ultra Sound Money shows the supply of Ether sitting below 120.16M after more than 21,000 ETH worth $62.8M were destroyed over the past two weeks. Ether’s supply has now dropped by 362,628 ETH since Ethereum’s Shanghai upgrade, also known as The Merge, was activated in September 2022.

ETH supply. Source: Ultra Sound Money.

Ethereum’s Shanghai upgrade transitioned Ethereum to Proof of Stake consensus, bringing with it a roughly 90% reduction in new Ether issuance.

While more than 1.05M ETH has entered supply as rewards for stakers since The Merge, Ethereum’s burn mechanism has permanently destroyed more than 1.4M ETH over the same period.

Ethereum on-chain activity jumps

The recent spike in transaction fees follows an uptick in decentralized exchange (DEX) trade volumes amid bullish momentum in the crypto markets, alongside an increase in NFT sales, and activity on Layer 2 networks.

DEXes processed more than $5B worth of trades over the past 24 hours — up 134% since Feb. 4, according to DeFi Llama. As of this writing, traders are racing to exit positions as ETH pulls back after breaching $3,000 for the first time in 22 months.

Data from Dune Analytics shows NFT volume jumping to $33M on Feb. 19, up 114% since Feb. 2.

Activity on Layer 2 networks is also bubbling, contributing to Ethereum mainnet congestion as L2 transactions are submitted to the base layer for finalization.

Data from L2beat shows combined Layer 2 throughput tagging its second-highest level on record during Feb. 17 and Feb. 18, with L2s processing more than 92.4 transactions per second on average.

Average transaction fees doubled in the past three days, according to Etherscan.


Analysts have also attributed the increase in gas fees to the launch of the ERC-404 token standard in early February. ERC-404 facilitates NFT fractionalization by utilizing both ERC-20 and ERC-721 tokens, resulting in gas-intensive transactions.

“ERC-404… allows multiple wallets to claim ownership of a single NFT - in other words, fractionalizing the ownership of the token,” said 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, surged 5,000% within one week after launching on Feb. 2, illustrating interest in the new standard. According to Ycharts, Ethereum’s average daily transaction fees tagged $71.42 two weeks ago — its highest level since May 2023.

Last week, Cygaar, a pseudonymous developer, followed up with the launch of DN-404, a token standard intended to build on ERC-404 by improving the efficiency of transactions.

“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,” Alun said.