Many Ethereum (ETH) investors are super excited about the Ethereum Improvement Proposal 1559, or EIP-1559 also called the “London Hard Fork”. This major update went live on Thursday 5 August, at around 1:15 PM UK time.
Before now, users who made transfers or transactions on the Ethereum blockchain had to pay a gas fee in Ethereum (ETH) for miners without even knowing the transfer fee beforehand. So, some of the users would even overpay to ensure their transaction goes ahead smoothly.
Sometimes, users would even bid against each other to have their transactions processed by the miners. Meaning that whenever there is a lot of traffic, the transaction fees will go super HIGH.
What is the main goal of Ethereum Improvement Proposal?
One of the main goals of the Ethereum Improvement Proposal 1559’s is to make the transaction fees predictable for users.
Greg Waisman, co-founder, and chief operating officer at the global payment network Mercuryo, told Coinbase: “The highly anticipated Ethereum ‘London hard fork’ event will expose users to a more flexible and cheaper fee structure and introduce a mild burn effect, billed to make Ether deflationary.
“The coin has trailed an uptrend from the weekend, and we may see this brewing positive sentiment over the coin shoot its price to $3,000 in the coming days/weeks following the update.”
Among many other enhancements, the Ethereum Improvement Proposal 1559 made it possible that a portion of all transaction fees or base fees will now be destroyed in each block on the Ethereum blockchain instead of paying a fee to miners.
According to the Ethereum Improvement Proposal’s description, this major upgrade was done to counterbalance Ethereum inflation while still giving the priority fee (the maximum amount of fee that users want to spend willingly) to miners.
How much eTH is burned with the eIP-1559 upgrade?
Just a few hours after the “London Hard Fork” or EIP-1559 upgrade deployment, over 630 ETH (about $1.77 million) were burned. At the moment, around 3.72 ETH (Just over $10,000 at current prices) are being burned every single minute according to Etherchain.org.
This large amount of Ethereum being burned has caused a transaction fee fluctuation. The base transfer fees have fluctuated between 70 Gwei to 100 Gwei ($5.84 to $8.34) in the few hours.
Although miners can still get the tips and block rewards from each transaction, their income will highly be impacted by the burning of the base fee.
OpenSea, one of the most popular non-fungible token (NFT) marketplaces, was the largest Ethereum burner with over 69 ETH ($191,268 with the current prices) burned with the transactions made in the platform since the upgrade.
If you remember the Bitcoin halving event which caused a huge boost in BTC price, the “London Hard Fork” upgrade would also introduce a deducted supply of ETH.
So according to Justin Drake’s model, it is estimated that around 1000 ETH would be supplied every day, and about 6000 ETH will burn at the same time.
OpenSea is trailed by two restatements of decentralized finance (DeFi) trading protocol Uniswap—Uniswap V2 (53.33 ETH) and Uniswap V3 (45.25).
“The much anticipated EIP1559 network upgrade was a huge day for the Ethereum cryptocurrency ecosystem. Now, every transaction, NFT purchase or loan on the Ethereum network will result in ETH being burned out of existence, making ETH a deflationary and inflation-busting asset,” noted Ross Middleton, chief financial officer at decentralized crypto exchange DeversiFi.
Middleton associated the new ETH burning mechanism with traditional stocks, clarifying that it is the same as “Apple Inc. burning AAPL shares every time someone bought something from the Apple App store or made an in-app purchase.”
However the price of Ethereum itself was not much affected so far, the token is now being traded at around $2,772.47, up 3.25% in the past 24 hours.