Ethereum Paradox: $18 billion destroyed, yet ETH supply continues to increase

Where does inflation come from despite EIP-1559?

Since the implementation of EIP-1559 in August 2021, Ethereum has introduced a mechanism for the irreversible removal of transaction fees from circulation. Since then, 6.1 million ETH have been burned, which at the current rate of $3.11K per ETH amounts to approximately 18 billion dollars. This is an impressive result for a deflationary mechanism – but it turns out that’s only half the story.

Here comes a discrepancy that surprises many observers. Despite the massive destruction of tokens, the total amount of ETH in circulation continues to grow. How is that possible?

The answer lies in the Proof-of-Stake (PoS) system that Ethereum adopted in 2022. Instead of mining (as in Proof-of-Work), validators receive rewards in the form of new ETH tokens for securing the network. As a result, since the London hard fork, about 4 million ETH have been added to the system – nearly the same amount as burned.

Inflation mathematics: why issuance still dominates

Although EIP-1559 sets a deflationary direction, in practice, the issuance of new ETH as validator rewards often exceeds the rate of transaction fee burning. Especially during periods when network activity declines, burned fees are insufficient to offset the newly issued tokens.

Result? Ethereum maintains a positive net inflation of about 0.8% annually. That’s much less than during PoW times, but it still means the supply is increasing, not decreasing.

The burning rate also depends on the intensity of network usage. During peak periods in 2021 and 2022, burning accelerated thanks to huge transaction volumes on platforms like OpenSea and Uniswap. OpenSea itself, as a leading NFT platform, eliminated hundreds of thousands of ETH. However, when activity wanes – as happened in 2025 – the deflationary effect also diminishes.

Will Fusaka change the game?

The latest Ethereum update called Fusaka brings significant performance improvements to the network. The solution opens the door for broader deployment of Layer 2 layers and rollups, which should reduce transaction costs and attract new users.

If Fusaka truly revitalizes the ecosystem and increases network utilization, the consequences will be significant for supply dynamics. Higher transaction volumes mean higher fees, which directly translate into greater ETH burning. In a bullish scenario, the burning rate could surpass PoS issuance, finally making Ethereum deflationary.

However, the effects will only be visible in the medium term. By the end of 2025, analysts’ forecasts vary greatly – from scenarios of stabilization around $3,000 to more pessimistic visions if Ethereum fails to stand out against competitors like Solana.

Key question: deflation or further growth?

Ethereum has burned tokens worth an astronomical $18 billion, yet its supply continues to grow. This is not a mistake – it’s the result of a complex interaction between the EIP-1559 mechanism and the Proof-of-Stake system. Both sides are in a dynamic balance, where network activity is a key condition.

The future will depend on whether Ethereum can attract mass adoption and maintain high activity. If the ecosystem develops, burning may finally surpass issuance, paving the way for real ETH deflation.