In less than 5 hours, Ethereum is rolling out the "London" mainnet upgrade, the largest update to Ethereum's core protocol in years. One major change is the Improvement Proposal 1559 (EIP-1559) Why? Because it constitutes a major shift in the economics of Ether (ETH). Here's how the upgrade works:
When you make a transaction on the Ethereum network, you pay a fee, which is called "gas" to the miner that validates the transaction. As activity on the network has surged due to DeFi applications and NFT markets, fees have spiked to the point that smaller or more frequent transactions are unfeasible.
EIP-1559 changes this system with two main aims:
making fees more predictable and
reducing the circulating supply of ETH over time. You'll now pay a simplified "base fee" that's typically set automatically by your wallet (you can also add a "tip" to speed up transactions).
Now the “base fee” will be burned instead of going to the miners. This means the ETH will be permanently removed from the network, in theory reducing the supply.
However, not everyone is fully onboard and the miners have the most to lose as their income potential in the short term will be reduced. An important aspect of this fee system is that miners only get to keep the priority fee.
Some thought are that by “burning” the ETH with every transaction could eventually make the cryptocurrency a more deflationary asset and help it evolve into a "store of wealth"-style investment similar to Bitcoin
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