The Burning Mechanism of Cryptocurrency ETH: When and How Does It Happen

What is Burning: An Innovative Mechanism in the Cryptocurrency Industry

Ethereum's “Burn” is a revolutionary concept in the blockchain field. It is not just a technical term but a mechanism that has profound impacts on cryptocurrency supply management, inflation control, and market structure.

The essence of burning is the process where a portion of transaction fees (ETH) generated during transaction execution is permanently destroyed. In other words, ETH in circulation is permanently removed from the market, leading to a decrease in total supply.

Changes Before and After the Introduction of Burning: The Turning Point Brought by EIP-1559

Issues with the Previous Fee System

Before the August 2021 “London” upgrade, transaction fees (gas fees) on the Ethereum network were entirely distributed as rewards to miners. The amount of fees paid by users varied significantly depending on network congestion, making transaction costs unpredictable.

Innovation Brought by the Implementation of EIP-1559

With the London upgrade, EIP-1559 was implemented, fundamentally changing the fee structure. A “base fee” is automatically set for all transactions, and this base fee is burned instead of being rewarded to miners. This change reduced the risk of unlimited ETH issuance and eased concerns about high inflation.

When Does Burning Occur: Details of the Continuous Process

Timing of Burn Occurrence

ETH burns occur every time a transaction is confirmed on the Ethereum network. The moment a block is mined (or validated), the total base fee used in all transactions within that block is automatically burned.

In other words, burning is a continuous process happening 24/7, 365 days a year. As long as the network is operational, supply adjustment continues without interruption.

Understanding Through Examples

For example, if a single block contains 500 transactions, the total base fee allocated to each transaction in that block is collectively burned. The higher the network activity, the greater the amount burned per block.

Factors Influencing Burn Volume: Correlation with Network Activity

The amount of ETH burned, i.e., the base fee, is dynamically determined by network congestion. Increased activity in DeFi, NFT trading, and smart contract execution causes gas prices to rise, which in turn increases the burn volume.

Conversely, during periods of low network utilization, the burn volume decreases proportionally. This dynamic adjustment creates an organic link between market demand and ETH supply.

Impact on the Cryptocurrency Market: Multiple Effects of Burning

Increased Scarcity and Reduced Supply

The burn mechanism gradually decreases the total circulating ETH. This reduction in supply can theoretically enhance ETH's scarcity value and serve as a medium- to long-term price support factor.

Inflation Control and Deflation Scenarios

The previously pointed-out issue of currency dilution due to new ETH issuance has been significantly improved with the introduction of burning. During periods of active network use, the burn volume can surpass new issuance, creating a deflationary environment.

Enhancement of Network Security

Burning provides an economic deterrent against spam transactions, contributing to the overall health and security of the network.

Psychological Impact on Investors

The perception of a “cryptocurrency with a continuously decreasing supply” encourages long-term holding among investors, fostering positive psychological effects.

Current Status and Future Outlook: ETH Trends Toward 2026

Current Scale of Burn Activity

From 2024 to 2026, several million ETH are burned annually. As of January 2026, the circulating supply of ETH reached approximately 120,690,000 ETH, with the price around $3,310 per ETH at that time.

Future Expectations for Burn Activity

The volume of burning closely correlates with activity on the Ethereum network. As new use cases such as DeFi, NFTs, gaming, and enterprise applications expand, the burn volume is expected to increase.

Key Technological Developments to Watch

Even after the full transition to Proof of Stake, ongoing optimization of fee structures and the proliferation of scaling solutions (Layer 2) are expected to continue evolving the dynamics of the burn mechanism.

Conclusion: Understanding the Burn Mechanism Can Change Investment Decisions

The answer to “When does burning happen?” in Ethereum is simple yet crucial. It occurs continuously at every transaction confirmation—an ongoing process.

This mechanism offers multiple benefits, including automatic supply adjustment, inflation suppression, and increased market transparency. However, it also depends on network activity levels and market trends, making it inherently variable.

As a cryptocurrency investor, a deep understanding of the burn mechanism, ongoing network developments, and market trends will enable you to develop more rational investment strategies. Choosing reliable platforms for ETH transactions is also an important decision factor. Through understanding Ethereum's burn mechanism, you can grasp the workings of the blockchain economy and seize upcoming market opportunities, paving the way for success.