An intriguing incident recently baffled the Ethereum community when an unidentified user treading with the name nd4.eth, intentionally burned 2,500 ether, which is equivalent to a massive $4.5M USD. This absolutely baffling move has raised questions about the motive behind it.
In a crazy chain of events, Ethereum users were taken aback when nd4.eth sent a significant amount of ether to what’s known as a “burn address” on July 26. This effectively reduced that massive count of ETH tokens from circulation in the market, and just like that, gone. Interestingly, some members of the community playfully praised nd4.eth for seemingly helping reduce Ethereum’s overall supply, aligning with the idea of Ethereum being referred to as “Ultrasound Money.”
Basically, in the world of cryptocurrencies, we can burn a particular token by sending it to an address that cannot be spent from, effectively removing the tokens from circulation permanently. Typically, this is done to decrease the total supply of a token. However, the specific reasoning behind this particular burn remains shrouded in uncertainty.
However, it is worth noting that the user nd4.eth is a holder of a significantly considerable amount of tokens across various protocols. This user possessed 34,287 GMX tokens (worth around $1.84M ) and 311,003 Gains tokens (equivalent to $1.43M ). Interestingly, this user also later sent an additional amount of tokens and ether (worth approximately $7,000) to the same burn address.
However, this baffling move really got the discussions around “Ultrasound Money” in the context of Ethereum going on. Let’s get going through how Ultrasound money works and why this transaction is a crucial step in igniting the discussion around that.
So, you might have heard that the total amount of ETH has increased a bit since “the Merge” happened. This might sound confusing because many people were expecting ETH to become more like “ultrasound money,” which is a term for a type of currency that becomes scarcer over time.
To understand why ETH can still be ultrasound money, let’s talk about what “sound money” means. Think of things like gold or silver, they’re valuable and people like to use them when regular money loses value. Bitcoin is also like this because there will only ever be a fixed amount of it.
Ultrasound money is even cooler. It’s a type of money where the total amount actually goes down over time. Now, here’s how ETH can become ultrasound money:
Staking ETH: When people stake their ETH, it’s like they’re helping run the Ethereum network. They get rewarded with new ETH for this. So, if more people stake their ETH, it can lead to more new ETH being created and added to the total supply.
Gas Fees: These are fees you pay when you do something on the Ethereum network, like making transactions or using certain applications. If more people use Ethereum, the gas fees can go up. But here’s the interesting part, some of these fees, which are nothing but ETH, actually get burned or destroyed, which reduces the total supply.
Now, let’s see how these things work together:
- Scenario 1: If lots of people stake their ETH and use Ethereum a lot, which means high network usage, then more new ETH is created from staking, but more ETH is also burned, from high gas fees. This can make the total ETH supply go down – ultrasound money!
- Scenario 2: If people stake their ETH but not many are using Ethereum which is low network usage, then the new ETH from staking might be more than what’s burned from fees. This could make the total supply go up a bit.
- Scenario 3: If not many people stake their ETH and Ethereum is not used much, then the new ETH might be more than what’s burned, which can increase the total supply.
So, is Ethereum ultrasound money right now? Not exactly, because the amount of staked ETH and network usage needs to balance right. But when more people use Ethereum (like during a craze for NFTs), it can become ultrasound money, and that’s the goal!
We’re not too worried about the ups and downs of prices for now – we’re thinking long-term. Just like how you save for something really special, Ethereum is working on becoming something really special in the world of digital money