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- Ethereum Issuance Set to Drop to Zero as XEN Crypto Gas Consumption Surges
Ethereum Issuance Set to Drop to Zero as XEN Crypto Gas Consumption Surges
Ethereum is set to switch back into deflationary issuance as on-chain activity and gas consumption on the network increase. Over the weekend, the Ethereum network saw a surge in on-chain activity, resulting in more gas being used and more ETH being burnt.
The ETH burning mechanism was introduced with the implementation of Ethereum Improvement Proposal 1559 (EIP-1559) in August 2021. The proposal sought to address some of the scalability issues facing the Ethereum network by introducing a fee market mechanism that would burn a portion of transaction fees instead of sending them to miners.
XEN (a pointless scam token) is currently ~15% of Ethereum gas spend.
- 4x more than all L2s.
- 20% above OpenSea.
- Not far from Uniswap v3.Right now, ETH net issuance is virtually zero. If on-chain activity ever comes back, ETH deflation will be bonkers.
— mhonkasalo.lens (@mhonkasalo)
8:58 PM • Dec 11, 2022
According to the Ultrasound.Money tracker, XEN Crypto is one of the highest gas consumers at the moment, burning over 210 ETH in the past 24 hours. This is more than the gas consumption of popular decentralized finance (DeFi) platforms OpenSea, Tether, and Uniswap.
XEN Crypto is a project created by the "Fair Crypto Foundation" and is backed by Google's first cloud infrastructure employee, Jack Levin. The project was launched in early October and allows anyone to claim, mint, and stake XEN tokens. Its Ponzi-type economics have been compared to the controversial HEX token.
The high gas consumption associated with XEN minting has pushed up gas prices and pushed down Ethereum issuance, bringing it close to zero at around 0.0011% per year. However, the Ethereum network is also seeing increasing interest in staking, with 15.6 million ETH currently staked, worth around $19.4bn at current prices.
The next Ethereum upgrade, the Shanghai fork, has been scheduled for March 2023 and will implement Ethereum Improvement Proposal 4895 (EIP-4895), enabling withdrawals of staked ETH. This will provide a boost to the Ethereum staking ecosystem and could further increase gas consumption on the network.
Despite these positive economic factors, ETH prices remain depressed and are currently down 2.2% on the day at $1,244. It remains to be seen whether the switch to deflationary issuance and the growing interest in staking will be enough to drive up ETH prices in the long term.