The Ethereum (ETH) Network recently announced the estimated date of its much anticipated “Merge,” or shift to a proof-of-stake (PoS) model. The declaration proved to be good for the ETH token’s price in the short term.
However, Ethereum’s EIP-1559 proposal, which changed the network’s fee mechanism to bring it closer to a proof-of-stake model, appears to have alienated developers on the second-largest blockchain.
ETH contracts deployed on mainnet fall below 200K
According to the data shared by Alex Svanevik, CEO of Nansen, smart contracts on the mainnet have reduced hugely since the launch of EIP-1559. The number has shrunk under the 200K mark for the month of April 2022. Meanwhile, April 2021 saw the contracts breaching 1.4 million. This has raised a big question about the utility of the mechanism.
The EIP-1559 also suggested incentivizing miners while reducing the network’s gas fees. As per Glassnode, Ethereum’s mining revenue has also reduced to an average $23,587.17. It has been recorded as the lowest in the last 5 years. The last 5 year low was reported on 24 December 2019. Meanwhile, the ETH mining difficulty reportedly just hit an all time high.
Why this is not bearish for ETH?
Seems like deploying the new mechanism is proving costly for the network. However, Svanevik noted that a bulk of the contracts that have left were focused on gas, and were made irrelevant by the proposal. That’s why a huge difference can be seen in the figures. The same is the case with GasToken, ChiToken and empty contracts. The reported figures do not suggest a bear move for the network and token. The reduced contract number is largely related to the gas tokens which don’t work now.
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NewsThis move suggests that developers are now moving to L2 where fewer funds are required to deploy contracts. The developers would surely avoid the mainnet if they are working on something fresh. On the market side, the ETH token prices are down by over 26% in the last 30 days- mirroring losses seen in its bigger peer Bitcoin. Ethereum token is trading at an average price of $2,382.
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