To control the soft supply and to limit the coins in circulation, Ethereum has devised a new mechanism, Ethereum burn. About $15876 worth of Ethereum is burned every minute.
The Ethereum burn mechanism sends this Ethereum to an unknown wallet that has no access key. It helps Ethereum to maintain its value. In this way, this Ethereum is lost forever.
What actually Ethereum Burn is:
To maintain a balance between newly mined tokens and already existing ones, a small quantity of each transaction on the Ethereum network is burned. The activity is carried out to limit circulation. This burned Ethereum is sent to an unknown wallet without any access key.
Is Ethereum Burn Necessary:
Bitcoin is a hard cap token, which means only 21 million tokens can be mined. Unlike Bitcoin, Ethereum is a soft cap token meaning it has an unlimited supply. Every newly mined coin decreases the value of already existing ones and unlimited supply means the process would have seriously damaged the market value of the coin. following 2021’s EIP-1559 protocol, a small part of every transaction is burned to keep the balance between supply and market value. The Ethereum network is averagely burning about $15876 worth of ETH per minute.
The circulating supply of Ethereum now is 119,362,902 ETH coins with a market capital of $306,664,555,139. The price of the coin can be calculated as:
Price of Coin=(Total Market Capital)/(Circulating Supply)
The price of Ethereum can be calculated as:
Price of Coin=306664555139/(119362902) = $2569.178111462135
Last year in August, Ethereum underwent a technical upgrade known as London Hard Fork that is gradually shifting Ethereum from a proof-of-work system to a proof-of-stake system which will eventually result in a reduction in energy consumption. Since the Ethereum 2.0 upgrade, the average Ethereum burn is 6.18 ETH per minute.