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Ethereum Commemorates One Year Since PoS Shift: $1.5 Billion in ETH Burned Alongside Other Significant Developments
A year ago, Ethereum ($ETH) experienced a major shift, moving from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. This change fundamentally transformed the network’s operations and had significant environmental consequences.
The transition to PoS played a crucial role in minimizing Ethereum’s ecological impact, as it eliminated the need for energy-intensive mining activities. This change represented a pivotal moment, positioning Ethereum alongside more eco-friendly blockchain solutions.
Another significant alteration took place with the introduction of the Ethereum Improvement Proposal (EIP) 1559 during the London hard fork. This EIP transformed the method of handling transaction fees on the Ethereum network. Rather than the previous auction-based system, users now pay a base fee for their transactions to be processed by validators. Furthermore, users have the option to tip validators to accelerate the processing of their transactions.
One of the effects of EIP 1559 has been the incineration of ETH tokens. More than 980,000 ETH tokens, valued at over $1.5 billion, have been burned. Concurrently, around 11.6 million ETH have been staked by a varied group of over 360,000 validators.
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Ethereum staking has become a lucrative opportunity for cryptocurrency holders and exchanges. These platforms enable users to stake their ETH, securing it on-chain to earn rewards while retaining liquidity through a separate token. A portion of these rewards can be redeemed in exchange.
Interestingly, in the last 30 days, Ethereum’s supply has shown a yearly growth rate of 0.03%, a significant change from the previous month when it saw a minor decline of approximately -0.003%. This change is linked to the decrease in fees paid on the network. Without the burning mechanism established by EIP 1559, Ethereum’s supply would have increased considerably by 3.4% annually during the same timeframe.
Importantly, Fidelity Digital Assets, the cryptocurrency division of the well-known investment firm Fidelity Investments, recently published a report titled “Ethereum Investment Thesis.” The report highlights that Ethereum is currently trading at a discount and posits that its fair value should be around $2,090 based on a discounted cash flow analysis. This evaluation takes into account Ethereum’s circulating supply of roughly 120 million ETH and its annualized fees, which have surpassed $6.8 billion.
In addition to these developments, large Ethereum whales have been actively acquiring ETH, with purchases exceeding $400 million within just 24 hours. This accumulation aligns with a broader correction in the cryptocurrency market, which has seen its total market capitalization hovering near the $1 trillion threshold.
In summary, Ethereum’s shift to PoS and the execution of EIP 1559 have diminished its environmental footprint and altered its economic landscape. These developments and increasing institutional interest indicate that Ethereum’s outlook remains positive despite short-term market volatility.
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