Ethereum (CCC:ETH-USD) continues to sap up attention from investors looking to diverge from the mainstream Bitcoin (CCC:BTC-USD) crowd. Presenting what is by far the largest utilitarian blockchain network by market capitalization, it pleads a convincing case to be the king crypto itself. Today, ETH continues to prove its salt to investors with a new Ethereum all-time high; this milestone comes as the network sees its first week-long deflationary period ever.
One of the most popular ways to drive hype around your network and boost your crypto’s value is through deflation. Many altcoins utilize token or coin burns in their transaction protocols; each transaction sends small amounts of crypto to a burn wallet to permanently remove it from the circulating supply. It’s effectively the crypto version of a stock buyback, keeping the float or circulating supply down to drive demand.
Ethereum is driving a lot of attention with its recently implemented token-burn mechanism. A major event of late summer, the London hard fork, was the first step toward the Merge upgrade; it created the Beacon Chain, a chain running alongside the main Ethereum network, which contains all of the main network upgrades users have been clamoring for for years. These chains will eventually merge and create a completely overhauled Ethereum network. In the meantime, though, the London upgrade also implemented a coin burn to the Ethereum protocol. Since then, bits of ETH from every transaction are sent to a burn address, which removes them from circulation.
New Ethereum All-Time High Comes as Coin Burning Outpaces Mining
As of right now, the network still employs a proof-of-work algorithm. The energy-intensive practice requires miners to mine for ETH, a practice that causes the total supply of ETH to infinitely increase. This algorithm is set to change to proof-of-stake with the Merge as Ethereum looks to be more energy efficient. As for the time being, though, miners can freely generate ETH as fast as they can mine it. However, for the first time ever, Ethereum is marking a shrinking supply, rather than an increasing one. This is helping to generate the Ethereum all-time high this morning.
The coin-burning strategy is working wonderfully; since it was implemented, an average of 15,000 ETH — or $65 million — is burned every single day. At current mining rates, about 8,000 ETH — or $35 million — is minted by miners on an average day. For the first week ever, the Ethereum network is seeing its supply deflate over a seven-day period. The total amount of ETH burned since the hard fork is over 724,000, equal to about $3.1 billion.
With the supply of ETH trending down for once, rather than up, investors are becoming hugely bullish on the crypto. Over $18 billion in ETH is trading hands so far today, and prices are reaching new heights. A 3% gain for the coin is enough to push it to a new all-time high of $4,492.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.