Ethereum, EIP-1559, Memecoins, And The Philosopher's Stone

There's no such thing as bad publicity - and no such thing as bad transaction volumes.

Ethereum, EIP-1559, Memecoins, And The Philosopher's Stone

There is only one thing in life worse than being talked about, said 19th century poet and playwright Oscar Wilde, and that is not being talked about.

To put it another way, there's no such thing as bad publicity or, in the case of Ethereum, no such thing as bad transaction volumes.

Gas fees on Ethereum mainnet have been driven to recent highs by memecoin (aka ****coin) trading. Gas has spent much of the last few days over 100 gwei. A simple DEX swap can cost $30-60—fine if you're trading ten thousand dollars' worth of assets, not so great for regular retail users or developers. For whatever reason, L2s don't seem to be soaking up that activity.

But Ethereum has a secret weapon: EIP-1559, aka Burning.

High Ethereum Fees: Bug Or Feature?

EIP-1559, which was activated in July 2021, sees part of the fees paid by users burned, every block. When blocks are full, that part of the fee (known as the base fee) is increased. Since the Merge in September 2022, when Ethereum switched to proof-of-stake and block rewards were reduced, the amount burned has been more than the new ETH created and distributed to stakers. Overall, these updates have made Ethereum deflationary.

Screenshot from Ultrasound.Money
Memecoin trading transactions have pushed Ethereum's weekly burn to over 60,000 ETH

Since the Merge, high fees aren't just a bug. They're a feature. The more activity there is on mainnet, the more ETH is burned. Per Ultrasound.Money, over 60,000 ETH has been burned in the last week alone, a staggering amount, worth over $100 million. Ethereum's "gas streak"—the number of consecutive blocks that have seen more ETH burned than minted—currently stands at 26 days.

The holy grail for the alchemists was the discovery of the Philosopher's Stone, which—in addition to granting immortality—would turn base metals into gold.

At a time when inflation is running hot, and banks are folding left, right, and center, there's comfort in holding a decentralized token that has a built-in mechanism for turning ****(coins) into something valuable.

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