EIP-1559 burns $1.8 billion worth of ETH. Why is the Ethereum supply still increasing?

This is the most intriguing paradox in the Ethereum ecosystem: since 2021, the network has permanently burned over 6.1 million ETH worth $1.8 billion, yet the total supply of Ethereum continues to increase. Behind this seemingly contradictory phenomenon lies a subtle interaction between the EIP-1559 mechanism and proof-of-stake (PoS) issuance. To understand all of this, we need to delve into the core economics of Ethereum.

How EIP-1559 Reshapes Ethereum’s Token Economics

In August 2021, the London hard fork introduced the EIP-1559 mechanism, fundamentally changing how Ethereum operates. Prior to this, all transaction fees went to miners. EIP-1559 split this process into two parts: a base fee that is permanently burned, and a tip that goes to validators.

This design is clear—by burning the base fee, it offsets new token issuance, ultimately making Ethereum deflationary. On-chain data shows that over six years, EIP-1559 has burned 6.1 million ETH. During periods of high activity, especially during the market booms of 2021 and 2022, on-chain transaction volumes on major protocols like OpenSea and Uniswap were enormous, generating high fees that were largely burned. For example, OpenSea alone burned millions of dollars worth of ETH through NFT trading volume.

However, since 2025, network activity has slowed, and the burn rate has decreased accordingly. This means the deflationary effect of EIP-1559 has become less pronounced, especially during periods of lower transaction volume.

How Proof-of-Stake Offsets the Burning Effect

Why is Ethereum’s supply still growing despite active token burns via EIP-1559? The answer lies in the proof-of-stake (PoS) mechanism.

The “Merge” upgrade completed in 2022 shifted Ethereum from energy-intensive proof-of-work (PoW) to proof-of-stake (PoS). This transition was a major efficiency leap, but it also changed how tokens are issued. During PoW, miners received newly minted ETH as rewards. Now, validators stake ETH to secure the network and earn new ETH as rewards.

The key issue is that the amount of new ETH issued often exceeds the amount burned through EIP-1559. Since the London hard fork, approximately 4 million new ETH have been issued to validators—almost offsetting the 6.1 million burned. What’s the result? Ethereum maintains an annual net inflation rate of about 0.8%.

This dynamic is especially evident during periods of lower network activity. When on-chain transaction volume drops, the burn amount decreases, but validator incentives remain fixed. As a result, net issuance becomes positive, increasing the total supply.

Can the Fusaka Upgrade Reverse This Trend?

Ethereum developers have not given up on the goal of achieving deflation. The latest Fusaka upgrade introduces a series of technical optimizations aimed at reducing transaction costs and increasing network throughput. By simplifying the deployment of Layer 2 and rollup solutions, these updates could attract more users and applications to the Ethereum ecosystem.

If Fusaka successfully stimulates network activity, transaction fees and burns could increase. In this scenario, the ETH burned through EIP-1559 might surpass the new ETH issued via PoS, ultimately shifting Ethereum from inflationary to deflationary. This would be a critical turning point.

However, experts are divided on whether this goal can be achieved in the short term. As of February 2026, ETH’s trading price is around $1,970, with mixed market sentiment. Some analysts predict that if the upgrade proceeds smoothly, Ethereum could regain momentum by mid-year. But if it loses appeal compared to competitors like Solana, the deflationary target might be delayed.

What Does This Paradox Mean for Ethereum?

Ethereum is currently at an economic crossroads. EIP-1559 has burned tokens worth $1.8 billion but has not prevented supply growth—this is not a failure of mechanism design but a contest between market environment and technological architecture.

Continuous supply growth has two sides. On one hand, it limits ETH’s scarcity premium. On the other, as long as Ethereum can attract users by enhancing utility, a larger supply might actually support a more active ecosystem. The success or failure of Fusaka and subsequent upgrades will determine whether Ethereum can reverse this trend. The answer to this question lies not just in on-chain data but in whether the Ethereum ecosystem can continue to innovate.