Ethereum’s EIP-1559 will be launched next month, this is a fast ELI12 | Via JefeDix | Capital | June 2021
Next month, the “London” hard fork of Ethereum will go live, followed by the Ethereum Improvement Proposal (EIP) 1559. Since the split between Ethereum and Ethereum Classic in 2016, one of the most important but controversial changes to the Ethereum blockchain, EIP -1559 has brought some changes to the way fees are set and distributed on the network.
Traditionally, users include a “gas” fee in their transactions to incentivize miners to include it in the block, and the fee is set by the model with the highest bid. If you set the fee too low, other users’ bids may be higher than your Gas fee, and your transaction may stay in the pool until it expires and is cancelled. This may result in unpredictable and unstable costs during periods of high usage. The new model will set a fee based on network usage, with a variable “basic fee” that will be destroyed or destroyed, and only optional tips will be paid to the miners. The basic fee or minimum fee is automatically set by the Ethereum protocol according to usage and needs, aiming to achieve a 50% network utilization rate and fluctuate up and down to achieve this goal.
Considering that miners earned more than $1 billion in transaction fees in May, it is understandable that miners and mining pools are upset about this change and have been vocally opposed to it, organizing protests and even threatening them in the past few months. Stop the network to show force against the escalation. These actions will only cause Ethereum developers to postpone their expected timetable for migration to Eth 2.0, which will formally transform the Ethereum blockchain from proof of work to proof of stake, thereby eliminating the role of miners in protecting the blockchain. The security of collateral assets, not hash power.
Since the basic fee will be destroyed when the transaction is included in a block, Ether may be deflationary. If the amount of Eth burned based on gas costs is higher than the amount of Eth given as a block reward, the total amount of Eth generated by each block will eventually be a negative number. During the previous network highs, this threshold will be exceeded, and it is believed that this will put upward pressure on the price of Eth because of the slight decrease in supply.
In the final analysis, EIP-1559 is an upgraded version of the blockchain that can help with adoption, because institutions and individuals can better predict how much they need to complete a transaction and how long it will take for the transaction to be confirmed.clarify How many with how long Wider adoption and acceptance by the wider financial community is extremely important.
Cheers, thanks for reading.
Disclaimer: None of these can be considered financial advice. Among the cryptocurrencies mentioned, I hold Eth.