Ether cryptocurrency is currently at its two-month high thanks to the highly awaited London Hard fork upgrade proposed to shorten the pace at which new tokens are minted.
The London Hard Fork and Ethereum Price
The upgrade, known as the Ethereum Improvement Protocol 1559 (EIP 1559) or the London hard fork, is supposed to go live on Thursday, August 5, at 1:59 pm. The hope that it will lead to continued growth for the cryptocurrency has been adversely felt among crypto enthusiasts. Ethereum is currently trading at $2,634.32, a 6.27% rise from yesterday.
The EIP-1559 aims to make transaction costs for Ethereum users predictable. Network users currently have to make bids against each other to have miners process their transactions. That means that the fees are far greater if the network is busy than if it is calm.
The upgrade split the 1300 new Ethers that are issued daily to pay miner fees into three. The network will remove one, the minimal cost for payment processing to miners from circulation through mining. The burning marks a crucial step in Ethereum’s history.
Some investors feel that burning is limiting the supply of ether might lead to dramatic price growth. However, developers argue the pricing influence is far from certain. Ben Edgington, an ether developer at ConsenSys, claimed that they couldn’t tell what the effects will be in terms of the ether burned until it is implemented.
Should Investors be Worried?
Although EIP-1559 is designed to reinforce Ethereum’s ecosystem – known for its smart contract capacities that drive DeFi or decentralized finance, applications and NFTs, or non-fungible tokens – it is unlikely that the upgrade will impact investors much in the short term.
However, in the long term, co-authors of the proposal expect that by restricting supply, ether will be deflationary. It would be ‘quite good’ for investors, especially with all the recent discussions in the United States about inflation. It will allow crypto-investors to hold a deflationary asset if they choose.
Investors should also note that EIP-1559 does not reduce the price of gas fees or the cost of network transactions, so that they may still be quite expensive. However, the upgrade is crucial because it can enhance the user experience of Ethereum and increase ether prices.
More Improvements to Come Next Year
Compared to the coming ethereum 2.0, EIP-1559 is small. Ethereum 2.0 targets the entire network, hence the huge significance, and will be complete by the first quarter of 2022.
Ethereum 2.0 is transitioning the network from a proof of work to a proof of stake kind of system. Users will stake their ether to allow them to verify transactions and earn coins on the new system.
Another major improvement is the scaling up project by the developers. They will add more side networks and link them to eliminate the network’s major congestions and transaction costs.
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