More ether burned for verification causing a drop in the number of tokens available by 4000
A Drop
The proof-of-stake change transformation of Ethereum was only a month away and recently the cryptocurrency has reached a new milestone. This week marks a deflationary period for the first time since the merge took place. Though this may sound promising it could have potential to be a dilemma for the team at Ethereum.
According to data from ultrasound money ETH supply has dropped by over 6,000 currently as more tokens were burned during transaction verification than those created in the same period.This has led to a reduction of 22% over the past week. It should be noted that Coinbase reported this is a fall of nearly 90% since the merge. The issue at hand is while the supply has dropped there has been no change in the price of the token, as there should have been a boost to the price due to the amount of available tokens being smaller.
The Merge
The merge was the change of the Ethereum network from an energy-intensive Proof-of-Work system to a more eco-friendly Proof-of-Stake system like that of Polygon, Solana, and a few other blockchains, the merge is only the first of five other upgrades planned for the Ethereum blockchain.
The merge was meant help the blockchain correct some of the issues of the blockchain such as gas fees and environmental issues. The transformation was intended to help with the massive amount of gas fees that some transactions required in order to be completed.
Gas Money
Gas fees were created to prevent the network from being overtaken by malicious requests, as more traffic arose the price of gas tended to rise with it. The fees are pocketed by the validators that process the ETH transactions. This past Saturday the cost and volume of fees started burning more ETH than was being created at the same time via staking and thus the total number of available ETH has dropped the amount mentioned earlier in this article. Another issue is that gas fees have risen instead of fallen as many imagined would be the case after the merge. The prices spiked more than 218% to 35 GWEI but there is now a current average of 11 GWEI being posted via the ultrasound money report.
What happened?
It would appear that the issue of Ethereum’s traffic and spike in gas fees would be a token project that goes by the name XEN Crypto. The transactions involving the token have accounted for a large percentage of the gas that is being used ( currently 40%) all across the network for the past 24 hours. This all comes from information shared by etherscan.io.
XEN is a cryptocurrency that is defined as a “universal cryptocurrency” that has no “intrinsic value.” The point of the token is to accumulate worth via the growth of a community. The token was free to mint and users only had to pay for the gas. This weekend was the debut of the token so the traffic around the mint was of course very high. The token itself started with no value, and currently sits at less than a fraction of $0.01, but it did enjoy a brief meteoric rise to $1.04 before crashing back down to the price it is at now. This translates to a currently useless and novelty token that generated $2 million in gas fees. The token launch was quickly named a ponzi scheme by some.
This is a bit interesting as the whitepaper of the XEN project critiques tokens that are “pump and dump” stating clearly that XEM tokenomics are the solution to this problem because it operates on a “fair system.”
Jack Levi, the creator of XEN has yet to provide a statement or rebuttal to any of the accusations.
