Following the Aug. 5 network upgrade, Ethereum block producers amassed $6.1 billion in ETH tokens.

An on-chain study published by Kraken Intelligence reveals strong accumulation behavior among Ethereum miners despite the prospect of lower revenue following a major network upgrade on August 5.

Ethereum miners accumulated an additional 2 million Ether (ETH), worth $6.1 billion, after the so-called London hard fork’s activation. The latest bout of accumulation caused miners’ net Ether holdings to hit an all-time high of 22.3 million ETH (worth nearly $70 billion), which is almost 19 percent of the total Ether supply.

“Despite ETH price trending lower, accumulation was stagnant for most of the summer before picking up speed in July,” according to the Kraken report.

“However, ETH accumulation among miners really took off after EIP-1559, as they likely saw the upgrade’s disinflationary effects drive up price.”

EIP-1559 FUD is rejected by miners

EIP-1559, which went live on Aug. 5 alongside the London hard fork, divided transaction fees (chargeable via Ethereum’s native token, ETH) into two parts: the base fee and the priority fee.

To add transactions to Ethereum blocks, the network began charging base fees. Meanwhile, it introduced priority fees — or voluntary tips — that Ethereum users pay to miners in order for transactions to be processed faster.

However, EIP-1559 altered the Ethereum token economy by introducing a fee-burning mechanism. As a result, the improvement proposal initiated the burning of the base fee, converting ETH into a deflationary asset by permanently removing a portion of its supply from circulation.

Burning a portion of total fee collection means that Ethereum miners will earn less money. As a result, the launch of EIP-1559 sparked concerns about lower mining profitability, with one study finding that miners’ revenue dropped by 15% immediately after EIP-1559 went live. However, this did not deter miners from increasing their Ethereum exposure, with the hash rate reaching a record high of 736.67 terahashes per second (TH/s) on Sept. 23.

This is despite a drop in Ethereum mining activity following China’s crypto crackdown in May, which resulted in a three-month low hash rate of 477.54 TH/s. Kraken stated:

“This tells us that not only was the reaction to the China crackdown exaggerated, but miners also see the latest upgrade as a net benefit to ETH that outweighed the disadvantage of its miner reward reduction.”

The mining boom is being driven by the NFT boom and staking sentiment.

Ethereum miners survived the EIP-1559 skepticism primarily due to rising ETH prices and high network demand driven by a surge in the nonfungible token (NFT) market.

Kraken reported that miner revenue hit a near four-month high of $70 million on Sept. 7, up 27 percent in a month following the Aug. 5 upgrade, as “NFT activity in projects such as PALS, Loot, and Junkies likely pushed priority fees higher.”

However, a recent slump in the NFT sector — characterized by significant decreases in the number of daily active users (-23 percent ), trading volume (-83 percent ), and transaction count (-31 percent ) — has also reduced miner revenue.

Nonetheless, the amount of ETH held by miners reached an all-time high, prompting Kraken to conclude that they are accumulating and mining Ether tokens in order to become validators on the upcoming Ethereum proof-of-stake chain, dubbed Ethereum 2.0.

To become validators on Ethereum 2.0’s network, users must stake 32 ETH into smart contracts. In exchange, they could earn up to a 5% annual percentage rate. According to CryptoQuant data, as of Sept. 29, Eth 2.0 had attracted 7.813 million ETH, worth $2.85 billion, from 48,780 unique depositors.

Meanwhile, as more Ether tokens exit active supply as a result of staking and EIP-1559 activation, the prospect of holding ETH may appear profitable for miners due to traditional supply and demand models.