Bullish for Ethereum: update for lower fees to come as early as July
The long-awaited fee-saving upgrade for Ethereum could be just a few months away, according to industry insiders.
„Ethereum Improvement Proposal“ (EIP) 1559 is the most talked about upgrade for the network since ETH 2.0 was launched on 1 December 2020. The EIP addresses the crippling issue of high transaction fees that have plagued the network in recent months.
The price hike and a booming DeFi sector have Bitcoin Union created a huge demand for Ethereum (New Ethereum record!). As a result, fees have risen to record levels.
According to BitInfoCharts, the average transaction fee is currently $17. However, these costs have peaked at $25 a few times this month.
EIP-1559 introduces a mechanism to adjust the current auction process that determines transaction prices. This should have the effect of dynamically adjusting fees so that users pay the lowest bid for the block.
„Predictions Global“ founder and Ethereum developer Ryan Berckmans has hinted that the upgrade could be introduced in July with the „London“ hardfork.
1/ EIP-1559 is huge for ethereum and coming soon
– likely launches in July
– delivers important benefits to all ethereum users
– would have burned ~$26M in ETH yesterday
Here are some EIP-1559 resources 👇
– Ryan Berckmans (@RyanBerckmans) February 21, 2021
Positive impact on Ethereum
While EIP-1559 will not have a direct impact on ETH prices, it will have an effect on supply. If the update is re-set, it would dynamically burn fees that should eventually reduce issuance over time as proof-of-stake gets underway.
Berckmans adds that there will also be scaling benefits for Layer 2 providers from the upgrade:
„One benefit of EIP-1559 is that it will help scale Ethereum this year by allowing Arbitrum and Optimism to reliably get their security transactions into the next Ethereum block. As Arbitrum and Optimism are critical to scaling Ethereum this year, so is EIP-1559.“
Earlier this month, he suggested that the long-term impact of the upgrade could drive ETH prices up to $20,000 as the fees burned go back to holders – as opposed to profits going to miners.
Bullish fee burn
„Framework Ventures“ co-founder Vance Spencer believes that the massive burning of ETH fees will create a „wealth effect tsunami“.
There is the added premise that miners currently need to sell their ETH to cover costs. Without this selling pressure, the asset has more room to grow in value under proof-of-stake.
Currently, Ethereum (Go to Buy Ethereum Guide) is trading at $1,887. The asset hit an all-time high of $2,050 on 20 February, according to TradingView. Since the start of 2021, Ethereum prices have gained 155%.