Ethereum Improvement Proposal also named EIP 1559 which will continuously destroy Ether will go live today on the Ethereum Mainnet as part of the London Hard Fork
The new upgrade will transform the economic structure of the Ethereum blockchain. EIP 1559 introduces a new monetary policy which will see that transaction fees are drastically reduced and transactions are processed faster.
The EIP introduces a dual fee system which ensures that users pay both a Base fee and a Tip fee.
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The current economic system in Ethereum requires payment for the performance of any task on the network. This payment in Ether is to prevent bad actors from spamming the network. Over the years, the economic arrangement has affected the network greatly and has resulted in several “ethereum killers” propping up hoping to dislodge the King of Smart Contract or take a share of its market.
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The EIP 1559 comes with an upgrade to this current system. With the introduction of a dual fee system, users interacting with the ethereum blockchain will pay a Base permanent fee algorithmically determined. This fee will fluctuate and subject to the network congestion. The Base fee will be burnt after collection and this will ensure that the network token reduces in supply.
The other fee which is called the Tip will be collected by Miners and it will be a tip on top the Base fee which is intended to incentive the miners to quickly process and confirm their transactions. The fee is personally determined by users.
A month ago, the EIP 1559 was put on the ropsten testnet and once fully implemented on the ethereum mainnet, it is expected to boost the economic activities on the blockchain.
Just a week ago, the Ethereum network became 6 year old. Will the upgrade result in upward price appreciation or will it bring back price actions to Ether if the upgrade fails? Share your thoughts below.