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ETH is becoming ultrasound money, ConsenSys founder says

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The founder of ConsenSys and co-founder of Ethereum Joseph Lubin; before the activation of the London update, in an interview with Bloomberg reporters called the cryptocurrency “ultrasound money”. According to him, ETH will become the basis of a new financial system of the future; the goal of which will be “democratization of the Earth”, that is, providing equal access to financial products in every region of the planet. Accordingly, the project has more than enough advantages.

Ethereum fans love to use the term ” ultrasound money”, as if making fun of Bitcoin fans. Recall that the latter call the main cryptocurrency “sound money” or “hard currency”; since the maximum amount of BTC in circulation limited to 21 million coins.

However, after the London update in Ethereum, a new mechanism for burning commissions appeared; thanks to which the cryptocurrency can become deflationary at all. In other words, in each block of the network, in some situations, more ETH will be burned than miners receive as a reward for their activities; and this is much cooler than just a limited maximum supply of coins. This is what Lubin focuses on as the key advantage of the cryptocurrency.

Is ETH a deflationary asset?

We checked the actual data: the London update activated with a block of 12,965,000. It was this block that activated the so-called EIP-1559, which has not yet solved the problem of high fees, but has already created inconveniences for miners.

After activating the update, the so-called base commission that users pay for the transaction is burned, that is, it is permanently out of circulation.

The base commission changes with the congestion of the network. The more users make transactions, the higher the base fee becomes – and the more ETH burned. And vice versa.

Note that the developers’ forecast did come true, and ETH has already played the role of a deflationary asset. Specifically, in block 12965274, 2.09 ETH was burned, while the block reward was the standard 2 ETH that is just created. This means that with a high network load, the amount of ETH in circulation will indeed decrease.

Finally, the total volume of burned Ethers is already in the thousands. At the time of writing, it exceeded the equivalent of $ 12 million.

In the first five hours of EIP-1559’s operation, the network burned a thousand ETH.

As a result, Ethers are successfully dropped out of circulation, which is what the developers wanted. Judging by the comments, they are happy with what is happening.

What will happen to Ethereum in the future?

According to the expert, very soon the demand for ETH will be several times higher than the demand for BTC. Lubin drew some parallels with gold and Bitcoin, and also explained why Ethereum would be a desirable investment for everyone.

It is worth noting that after the recent upgrade, Ethereum as a whole may not become a deflationary asset, that is, this is not the main goal of the hard fork. Some note that this will only be possible after the final transition of cryptocurrencies to the Proof-of-Stake algorithm, when the validators replace the miners on the ETH network.

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