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The Supply Stability of EIP-1559

The Supply Stability of EIP-1559

How the London hardfork has reduced the volatility of supply inflows.

Oct 20, 2021
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The Supply Stability of EIP-1559
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The response of all physical and monetary systems can be broken into two parts: steady-state and transient response. Transient responses either fade or oscillate in time, suggesting that for a long time preference they can be neglected.

In terms of ether pricing, the supply side of the long term steady-state is driven by miner inflows into the market. Therefore, the most important trend to model when gauging market supply is how miners are reacting to issuance/rewards.

In time the market will converge to a simple truth:

Price / Token = Net Monetary Demand Inflows ÷ Net Supply Inflows

Everything else is just noise. Today the focus is going to be on net supply inflows and how EIP-1559 and token burning has helped to stabilize that part of the market.


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