The destruction mechanism of Ethereum is an innovative design introduced in the 2021 London upgrade, with the core being the reconstruction of the network’s value distribution mechanism. Unlike the fixed total of 21 million Bitcoin coins, ETH achieves supply regulation through a dynamic destruction mechanism – when users pay transaction base fees, these fees no longer flow to miners (PoW period) or validators (PoS period), but are permanently removed from circulation. This design creates a dual economic effect: firstly, it makes ETH the first smart contract platform asset with deflationary characteristics, and secondly, by directly feedback the value of on chain activities to holders, it forms a value capture mechanism similar to enterprise stock repurchases.
As of June 2025, the mechanism has cumulatively destroyed ETH worth $13 billion, which is equivalent to the volume of traditional technology companies’ annual repurchase plans during the same period. It is worth noting that the intensity of destruction is positively correlated with network usage: when DeFi applications explode or NFT transactions surge, the increase in base fees will accelerate the deflation process, and this dynamic balance makes ETH’s monetary policy self regulating.
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