Even though Ethereum miners faced the potential of decreased earnings following a significant network update on Aug. 5, on-chain research provided by Kraken Intelligence reveals robust accumulation behavior among them.
Following the activation of the so-called London hard fork, Ethereum miners accumulated an extra 2 million Ether (ETH) worth $6.1 billion. Miners’ net Ether holdings reached an all-time high of 22.3 million ETH (worth approximately $70 billion) during the current round of accumulation, accounting for nearly 19 percent of the entire Ether supply.
“Despite ETH pricing moving lower, ETH accumulation was static for much of the summer before picking up momentum in July,” according to the Kraken study.
EIP-1559, which came online with the London hard fork on Aug. 5, split transaction costs into two parts: the basic fee and the priority fee (charged through Ethereum’s native token, ETH).
To add transactions to Ethereum blocks, the network began charging basic fees. Meanwhile, priority fees — or voluntary tips — were established, which Ethereum users pay to miners in order to speed up transactions.
However, by introducing a fee-burning mechanism, EIP-1559 altered the way Ethereum’s token economy operates. As a result, the upgrade proposal triggered the burning of the base fee, thus turning ETH into a deflationary asset by removing a portion of its supply from circulation forever.
Ethereum miners will see a reduction in earnings as a result of burning a percentage of total fee collection. As a result, the implementation of EIP-1559 raised concerns about reduced mining profitability, with one research indicating that miners’ revenue plummeted by 15% immediately following the launch of EIP-1559.
However, miners continued to increase their Ethereum exposure, with Ethereum’s hash rate reaching a new high of 736.67 terahashes per second (TH/s) on Sept. 23.
Because of growing ETH prices and increased network demand fueled by a growth in the nonfungible token (NFT) market, Ethereum miners mostly avoided the EIP-1559 FUD.
On Sept. 7, miner revenue hit a near four-month high of $70 million, up 27 percent in a month following the Aug. 5 upgrade as “NFT activity in projects like PALS, Loot, and Junkies likely pushed priority fees higher,” according to Kraken.