- On Thursday the Ethereum network experienced the EIP-1559 update which was included in the network update called “London Hard fork.
- Some consider that this update could spell a takeoff for Ethereum.
This Thursday was a very special day for the crypto community and especially for the Ethereum network, since the long-awaited update was carried out, which will change the way transaction fees work and will begin to destroy the coins.
This modification has a technical term that is called as Protocol of improvement of Ethereum 1559 or EIP-1559. This update was included in the network update called “London Hard fork”.
This update was one of the most anticipated for the network, so we present you four keys that you should know about what happened on this day and why it could mean a takeoff for Ethereum. Here we leave you the guide presented by Carbonyte Limited, Britain’s leading fintech.
1) The goal of EIP-1559
EIP-1559 aims to make transaction fees more predictable and the network easier to use. Currently, the rates are the opposite, unpredictable, their price is changing and there is no way of knowing how much will be paid. It is largely due to the fact that the network uses an auction system. This means that users pay more for miners to choose their transactions and thus be verified faster.
When the network has a high volume of traffic, transaction fees can reach much higher amounts than when the network is not being used as much. The main problem, as developers see it, is that the “blind auction” system makes fees “very volatile and unpredictable.”
The EIP-1559 update makes users pay a “base fee” that will be algorithmically determined by the network, so it is no longer necessary to submit offers and that miners “choose” said transaction. Even though the system has been modified, it will be possible to encourage miners through “tips”.
2) ETH token burning
EIP-1559 excited the crypto ecosystem because it will destroy or “burn” ETH, the network’s cryptocurrency, something that other cryptocurrencies such as BNB tend to do, to cite one example. Miners will not receive the base rate, because this could cause them to handle network congestion to keep the rate high. Instead, ETH will be destroyed.
Will this impact the price? It is not known, or at least the developers are not clear. The price depends on many other issues, such as transaction volumes, which determine how high gas rates are and how much ETH is destroyed.
“Until it is implemented, we do not know what the effect will be in terms of ETH burned.“explained Ben Edgington, Ethereum developer at ConsenSys.
After the first 24 hours, a little analysis can be done about it and Ethereum did grow, although so did the rest of the cryptocurrencies. It is currently at the $ 2,900 resistance, a value that has not reached since May 26.
The response it delivered in the first 24 hours is hopeful that the trend will continue and the second largest cryptocurrency on the market will continue its acceleration and recovery process.
3) predictable transactions
Transaction fees on the Ethereum network can go down, which is most likely because having a lower fee will prevent users from overpaying. This would be a consequence, although not the primary goal of EIP-1559, which focused on making rates more predictable, not lower. The base rate will change: it will go up when the Ethereum network experiences peak times and will go down when it doesn’t have as much traffic.
4) The upcoming changes to the Ethereum network
EIP-1559 is very small compared to Ethereum 2.0. This update appears as a mouthful of what will be “a review of the entire network infrastructure.” As the developers put it, the big change is coming early next year.
The change that Ethereum 2.0 will deliver will be to switch from a “proof of work” system to a “proof of stake” system. Under the PoW regime, miners use huge amounts of computing power to verify transactions, drawing hundreds of criticisms for the large amount of energy used in these operations. With PoS (staking system), users will present ETH to verify transactions and be recomposed.
As much as Ethereum 2.0 will be the sea change that the network will experience in 2022, the minds behind ETH are not stopping and are also working on adding side networks. The idea is to link them together and make an even bigger system.
Ethereum will go through moments of illusion and the first update of what its future will be is on its way. A big date is coming for the crypto world. Although there is still a long way to go.
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