Ethereum: $470 million was “burned” due to NFTs in one month

NFTs have become so popular that their creation and sale represent an increasingly large share of transactions on the Ethereum blockchain.

The most popular NFT sales platform, OpenSea, broke a record: in January 2022, over $5 billion worth of NFTs have been traded. A colossal and historical sum which shows that, almost a year after the start of their popularity, the success of these non fungible tokens (non-exchangeable token) seems set to last. NFTs, these certificates of digital property, have become a real social phenomenon and have enabled an extremely active virtual art market to be created — a market that now weighs several billion dollars.

But NFTs have had a significant impact not only on the art market: these tokens have become so popular that they now represent a very large part of all transactions that take place on the Ethereum blockchain, on which they are mostly in circulation. And in the month of January, NFT traffic was so high on the network that the equivalent of more than $1 billion worth of ETH was destroyed — an amount for which they are largely responsible.

Bored Ape Yacht Club NFTs // Source: Bored Ape Yacht Club

The equivalent of half a billion dollars destroyed because of NFTs

In order to understand why all this amount of money was destroyed, one must understand the concept of corner burn. This name designates an operation which consists in automatically destroying, with each transaction, units of crypto-currency. Concretely, for each operation on the blockchain, users must pay base feeskinds of service charges: these are the charges that are destroyed by being sent to a addressan address without a key that can never be used.

The practice may seem counter-intuitive, especially given the price that some cryptocurrencies reach today and the energy required for their production. But for miners, it’s about limiting the number of ETH units in circulation in order to drive up their price. The voluntary destruction of these units therefore makes it possible to artificially drive prices up.

Coin burn was introduced very recently on the Ethereum blockchain, with the London hard fork, in August 2021. The practice, which is still recent, has therefore not yet been studied too much, but it allows for the first time to measure the popularity of NFTs — and to better understand their importance on the network.

The specialist firm Nansen Analytics published a report, viewed by The Coin Telegraph, which reveals that the equivalent of $1.096 billion in ETH was destroyed in the month of January. More interestingly, the Ultra Sound site shows that NFT transfers are responsible for 43% of all coin burn, or nearly $471 million. OpenSea is even the first burn leader, with 66,840 ETH destroyed (i.e. 184,488,029 dollars), ahead of traditional operations on the blockchain.

NFTs therefore occupy a very important part of the Ethereum blockchain, even ahead of the decentralized finance sector, which is nevertheless one of the major areas of blockchain development. Proof that these tokens will remain popular for a long time.

NFT transfers drive 43% of all January coin burn // Source: Ultra Sound
OpenSea is causing a lot of coin burn // Source: Ultra Sound

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Ethereum: $470 million was “burned” due to NFTs in one month

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