Watching the Burn - The Daily Gwei #407
A watched ETH always burns.
Watching the ‘Burn Leaderboard’ on ultrasound.money has become a bit of a sport for me lately. I always love seeing which things are burning the most ETH and over which interval as it acts as a good proxy for what’s currently hot in the Ethereum ecosystem. If you look at what has burned ETH over the last 7 days, you’ll see that the SOS token that everyone was talking about came in 7th place whereas if you look at the last 24 hours you’ll see that an NFT drop, ‘Prime Ape Planet’, is in 6th place.
Now, while SOS and random NFT drops are basically guaranteed not to stay in the top 10 or even top 20, there are a few staple contracts that are constantly highly ranked. Looking at the all time burned list, we can see that OpenSea comes in at number 1, followed by ETH transfers in 2nd place, Uniswap occupies 3rd and 5th place (v2 and v3) and Tether (USDT) sits in 4th place. Uniswap is pretty much always in the top 5 no matter which time interval you look at as it’s a major gas guzzler for a few reasons - it’s the most well known/popular app on Ethereum by far, there are plenty of arb/MEV bots that constantly interact with the Uniswap contracts and any time a new token is launched it is instantly “listed” on Uniswap which means most of its activity flows there. The arb/MEV bots are particularly important to understand here because they will quite literally pay up to 99% of the transaction value as fees as it’s still worth it for them to eek out that 1% profit.
OpenSea still being on top of the all time interval just speaks to how crazy the NFT mania has been since EIP-1559 went live in August though it also speaks to just how “heavy” NFT transactions are. Minting and trading of NFTs is quite computationally expensive on Ethereum and thus interactions with these contracts eats up a lot of gas. Though people were happy to pay these insanely high fees because during the mania the profits were flowing quite nicely - you could mint an NFT and then resell it on OpenSea for much more basically instantly. This, of course, also led to many “gas wars” where people would try to outbid eachother which meant gwei would spike to 2000-3000 or more and then come back down once the NFT mint had finished. Obviously the NFT mania has died down over the last couple of months and this has been reflected in the burn leaderboards with OpenSea dropping to second place over the last 30 days (ETH transfers sits at number 1).
Another insight we can glean from the Burn Leaderboard on the shorter timeframes is figuring out why gas may be higher than usual. If you see a sudden spike in gwei, you can check the 5 minute timeframe and you’ll see the responsible contract at the top of the list (usually an NFT drop). If fees have been unusually high for a 24 hour period, you can just look at the 1 day timeframe to see if the usual suspects are in the top 10 or if there’s some new entrant causing the high fees. This can help you decide if it’s worth waiting a day or so for fees to come down before doing a non-time sensitive transaction.
It’s pretty crazy that 1.3 million ETH ($5 billion) has been burned in less than 5 months and the most interesting thing to me is that OpenSea alone has been responsible for burning 10% of that. If EIP-1559 had gone live last year, OpenSea wouldn’t of even be ranked in the top 50 - this just speaks to the wild year NFTs have had. Will we see some new long-term entrants in the top 10 next year? Maybe - it’d be cool to see a layer 2 network become a top 10 staple burner - and I do actually believe we’ll see that next year given that I think layer 2’s are going to finally take off in 2022.
Have a great day everyone,
Enjoyed today’s piece? I send out a fresh one every week day - be sure to subscribe to receive it in your inbox!
Join the Daily Gwei Ecosystem
All information presented above is for educational purposes only and should not be taken as investment advice.