As global financial institutions wrestle with record levels of inflation, Ethereum is facing an inverse dilemma.
Since Saturday, ETH supply has dropped by over 4,000 tokens, according to data from ultrasound money, but saw no corresponding price boost. ETH’s price, despite a lowered supply, has fallen some 3.6% in the same period, to $1,307 at writing.
The turn marks the first deflationary run—where more ETH is destroyed than created—since the Ethereum network’s landmark move to prove of stake in September.
All Ethereum transactions require so-called gas fees, which increase Ethereum’s security by preventing the network from being overloaded with malicious requests. The greater the traffic on the Ethereum network at a given time, the higher gas fees will soar.
Gas fees are pocketed by the validators who process all ETH transactions. Since the beginning of a network upgrade called EP-1559 last augusthowever, a portion of every gas fee has also been destroyed, to automate transaction prices and limit the supply of ETH.
Beginning Saturday, the cost and volume of gas fees started burning more ETH than was being concurrently created via staking—the post-merge process by which ETH is now generated. Since then, the total amount of ETH in circulation has dropped by 4,001 ETH and counting, with the rate of burning still continuing to outpace the rate of ETH creation.
Average gas fees on the network have meanwhile spiked 218% since Friday, to a current average of 35 gwei, and show no sign of letting up.
The source of the irregular uptick in Ethereum traffic—and thus spike in gas fees—that prompted ETH’s deflation appears to be a novel token project called XEN Crypto. XEN Crypto transactions account for 40% of all gas used network-wide in the last 24 hours, according to data from etherscan.io.
XEN, a cryptocurrency created by early Google engineer and crypto influencer Jack Levin, defines itself as a “universal cryptocurrency” with “no intrinsic value” that will accumulate worth “as more and more people join and participate in minting.”
The token, which started this weekend, started with no supply, but was free to mint (users only had to pay ETH gas fees to generate XEN tokens).
On Sunday morning, the token’s price rocketed from a fraction of a cent in value to $1.04. Within five minutes, XEN crashed back down to slightly less than a cent, before plummeting again to a near-zero fraction of a cent, where the token’s value has since remained.
1) its a ponzi that relies on people believing in whatever this is and continually buying into the token 2) its making eth deflationary 3) the usual suspects who i would have expected to be sybilling this aren’t
XEN’s litepaper specifically critiques tokens that encourage “pumping and dumping,” and alleviates that XEN’s tokenomics will solve this problem. Because no pre-existing supply of XEN was initially distributed to the token’s creators, the litepaper argues, it operates on a “fair system.”
…aims to empower the individual…
No pre-mint No Admin Keys Immutable Contract No listings on CEXs Starts with zero supply
Levin, the token’s creator, did not immediately respond to Decrypt‘s request for comment.
Stay on top of crypto news, get daily updates in your inbox.
Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.