- Ethereum experts started making positive statements one after another about the EIP-1559 update. However, there are technical and political obstacles that need to be overcome before implementing the update.
Ethereum experts started making positive statements one after another about the EIP-1559 update. However, there are technical and political obstacles that need to be overcome before implementing the update.
The new update could be positive for Ethereum price
A report released Thursday from crypto investment fund Grayscale predicted that if a proposed upgrade to the Ethereum blockchain is implemented, it would create a “positive feedback loop for the ETH price”. Decrypt spoke with analysts to understand the cause of the situation.
According to the Ethereum Improvement Proposal (EIP) 1559, in the next upgrade, the Ethereum blockchain will use Ethereum transaction fees to buy ETH in the open market, and then destroy it, reducing the overall supply of ETH.
An update to limit supply
Tim Ogilvie, CEO of Staked, an Ethereum infrastructure services company, said to this update “It’s like a company that makes a profit and takes back its shares. He said that burning billions of dollars in ETH could increase the price of ETH. “The net effect is that the remaining shares increase in value as the supply is less.”
“It’s an extremely bullish development,” said Ogilvie.
With the current market value of ETH close to $ 200 billion, he estimates that the network will burn 1-4% of the supply each year. “If you like BTC’s fixed cap of 21 million tokens, you’ll also love decreasing ETH.
Volatility in transaction fees can be reduced
Implementing EIP-1559 will impose a set fee for processing Ethereum transactions and replace the current auction-style market where users face ever-changing transaction fees.
It is hoped that the introduction of a certain fee will make the fees less volatile by preventing miners from changing transaction fees that attract large amounts of money from users. This is a very critical development considering users are paying an average of more than $ 20 per transaction this week.