ETH burn: how ether becomes deflationary and why not always

Since August 2021 (EIP-1559), Ethereum has been burning the base portion of every fee: these ETH disappear forever. Combined with the transition to PoS, which cut issuance by ~90%, this created a unique mechanic: ETH supply can shrink.

How it works

The fee is split into a base fee (burned) and a tip (to the validator). The base fee floats based on network load: full blocks - it rises, empty blocks - it falls. The net supply balance = validator issuance minus burn. When the network is active, burning exceeds issuance - ETH is deflationary; during quiet periods, it is mildly inflationary.

The nuance that shifted the balance

Activity has moved to L2 - and rollups, after the implementation of blobs (EIP-4844), pay the base layer next to nothing. Users keep growing, but they burn gas on Arbitrum and Base, not on mainnet: burning has dropped, and the "ultrasound" mode has become episodic. ETH's deflationary nature is a function of demand for L1 blockspace, not a constant.

For a holder, the sober takeaway is this: the "ETH is deflationary" thesis should be verified, not taken on faith - the current issuance and burn balance is public. Live price and metrics are on the ether page.