Ether Turns Deflationary as Amount of ETH Burned Spikes Amid FTX-Induced Market Volatility

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Ether's net issuance turns negative alongside an Increase in at the amount of ether burned, a sign the cryptocurrency's prospects as deflationary asset depend heavily on network usage. Reports godbole17

Ether has turned deflationary for the first time since the token's parent blockchain Ethereum changed how it processes transactions nearly two months ago.shows the second-largest cryptocurrency's net issuance, or the annualized inflation rate, has dropped to 0.029%, indicating that the leading smart contract blockchain is now burning more ether than what's being minted.to a proof-of-stake consensus mechanism of verifying transactions from a proof-of-work mechanism on Sept. 15.

The deflationary milestone, however, remained elusive for nearly two months before finally being reached, with the recent increase in the Ethereum network activity prompting an uptick in the amount of ether burned. That's a sign that ether's prospects as a deflationary asset heavily depend on the degree of network usage.

On Wednesday, more than 5,000 ETH was burned, the highest single-day tally since June, according to Etherscan. More than 13,000 ETH have been burned in the past three days alone. The Ethereum Improvement Proposal -1559, implemented in August last year, introduced a mechanism to burn a portion of fees paid by users. The EIP is essentially tied the amount of ether burned with the network usage.

The amount of ether burned rose to a five-month high on Wednesday, indicating increased network usage.

 

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