eip 1559 upgrade - Pwim.Net

Ethereum To Become a Deflationary Asset and See Its Supply Reduced with Proposed EIP 1559 Upgrade

The Ethereum Foundation is set to implement the Ethereum Improvement Protocol (EIP 1559), an upgrade that will see the network’s native cryptocurrency Ether get burned everytime it is used for transactions. The proposal may be implemented as early as July.

The Beauty of the EIP 1559

The Ethereum Blockchain is unarguably the world’s most used public blockchain, with numerous decentralized finance applications building on it. There have been incessant calls for an alternative to the congestion the network faces, which significantly increases Ethereum gas fees, a fee each user needs to pay for transacting on the blockchain.

With the EIP 1559, the network sets a base fee for every transaction that is carried out on the Ethereum network giving fair opportunity to all. Users who may wish to conduct their transactions faster than the standard provisions of the network can add a tip to validators, to fast-track their transactions. A part of this tip is burnt, helping to improve the monetary policy of the Ethereum network as a whole.

Additionally, the EIP 1559 upgrade will eliminate the use of other digital tokens for payment of fees in the Ethereum Network. Only Ethereum will be used, thus restoring the unique relevance of the Ethereum (ETH) cryptocurrency.

Implications for Ethereum’s Price

Scarcity is introduced each time Ethereum is burnt after being used in transactions, a feature that helps prevent the inflationary tendencies the network has been exposed to since its launch back in 2015. With this deflationary model, the price of Ethereum is bound to take an upward swing.

Reduced supply and scarcity are characteristics that Bitcoin has wielded to present itself attractive to investors over the years. There are only 21 million BTC that can ever be mined, and with the scheduled reduction in Ethereum’s supply, the demand for Ether may go up. Therefore, with the announcement that EIP 1559 will be implemented, Ether has resumed an uptrend.

Ethereum Leads ahead of Traditional Markets Performance over the Past 30 Days

The London Hardfork or EIP 1559 upgrade that got activated in August seems to have boosted Ethereum’s performance in the last 30 days.

Market analyst under the pseudonym Crypto Gucci explained:

“Ethereum outperformed all traditional markets in the past 30 days. Over 3.6 billion total value locked (TVL) in ETH’s Layer 2. Ethereum is doing 34x the fee revenue of BTC.”

Despite Ethereum experiencing an 8.7 % drop in the last 24 hours to hit $3,142 during intraday trading, according to CoinMarketCap, the second-largest cryptocurrency has been experiencing an uptick in activities.

For instance, the TVL in Ethereum’s layer 2 recently surged to $3.6 billion. This is a scaling solution created to mitigate congestion on the network. As a result, decentralized applications (dapps) can avoid network congestion by utilizing various technologies.

Furthermore, the amount staked in Ethereum 2.0 reached an ATH of 7,689, 506 ETH.

ETH 2.0 deposit contract went live in December 2020 and is expected to boost scalability by offering a transition to a proof of stake (POS) consensus mechanism from the current proof of work (POW) framework.

Ethereum exchange withdrawals slip to a monthly low

According to crypto analytic firm Glassnode, the number of ETH exchange withdrawals hit a 1-month low of 1,257.083.

Meanwhile, market analyst Ali Martinez speculates that Ethereum will surge. He explained:

“Five reasons why Ethereum will skyrocket: 1) 7.70M ETH locked in 2.0 deposit contracts, worth $28B. 2) 303K ETH burned to date, worth $1.10B. 3) Supply on exchanges at a 3-year low of 19.45M ETH. 4) Supply outside exchanges at ATH of 98.30M ETH. 5) Stable price support at $3,500.”

Burnt Ether is now worth a billion-dollar value, given that scarcity was introduced every time ETH was burnt after being used in transactions. The London Hardfork upgrade introduced this feature.

Additionally, it eliminated the use of other digital tokens for the payment of Ethereum fees. Only Eth was utilised, thus restoring the unique relevance of the ETH cryptocurrency.

Burnt Ether Tops $2B as Ethereum 2.0 Deposit Contract Continues to Grow

Ethereum’s market capitalisation recently breached the $500 billion mark as more investors keep a keen eye on this network.

Ethereum’s uptick in activities can be illustrated by the fact that burnt Ether stands at 608,567 ETH worth $2.089 billion since the London Hardfork or EIP 1559 upgrade went live on August 5.

This upgrade prompted the first-ever deflationary block on the Ethereum network because scarcity was introduced every time Ether was burnt after being used in transactions.

This feature helped in eliminating inflationary tendencies that the network was accustomed to before.

The London Hardfork upgrade also eradicated the use of other digital tokens for payment of fees on the Ethereum Network. Only Ether was utilised, thus restoring the unique relevance of the ETH cryptocurrency.

Total Value Locked in Ethereum 2.0 breaks the record

According to crypto analytic firm Glassnode:

“The total value in the ETH 2.0 deposit contract just reached an ATH of 8,000,290 ETH.”

Ethereum 2.0, also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that sought to transit the current proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) framework.

The POS algorithm allows the confirmation of blocks to be more energy-efficient and requires validators to stake Ether instead of solving a cryptographic puzzle.

As a result, it is touted to be more environmentally friendly and cost-effective. ETH 2.0 is also expected to improve scalability through sharding.

Israel intends to launch its CBDC on the Ethereum network

Israel plans to launch its central bank digital currency (CBDC) on the Ethereum network through its central bank, the Bank of Israel.

The trial intends to check the pros and cons of digital currencies, and the nation sees Ethereum as an ideal solution.

CBDCs represent the digital form of a nation’s fiat money. They are managed directly by the country’s central bank and are backed by national credit and government power.

To stabilise currencies liquidity which the seemingly inevitable cashless society in the future, many countries are now launching experiments to test the workings of CBDC.

In September, the Bank for International Settlements (BIS) teamed up with the central banks of South Africa, Malaysia, Singapore, and Australia to kick start a project dubbed Dunbar to test the application of CBDCs in cross border payments.