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EIP 1559 – Ethereum london hard fork price prediction for gas fees troubles miners – ETH 2.0 incoming

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EIP 1559 – Ethereum london hard fork price prediction for gas fees troubles miners – ETH 2.0 incoming

EIP 1559 – Ethereum london hard fork price prediction for gas fees troubles miners – ETH 2.0 incoming

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EIP-1559 – Controversial Hard Fork

EIP 1559 - Ethereum london hard fork price prediction for gas fees troubles miners - ETH 2.0 incomingThe eagerly awaited Ethereum hard fork “London” has been activated but has caused some controversies! According to CNBC, the ether price has already risen by 3.9% in the last 24 hours. The successful upgrade brings several changes to the network, including a change in how transaction fees are priced. This makes it difficult for the miners to earn money with the ether, which is why the update does not exactly generate enthusiasm on their part. For everyone else, however, the update is a good thing: the changes to the code of the second largest global cryptocurrency help address a scaling issue that has increasingly plagued the network in recent months. Ethereum often had very volatile and excessive transaction fees.

In contrast to Bitcoin, the Ethereum blockchain is not just a currency but mainly an application platform on which other systems and cryptocurrencies can build. The recent surge in interest in non-fungible tokens (NFTs), which occurs to a large extent in the Ethereum network using its blockchain, as well as the enormous increase in interest in DeFi, also in large part on the Ethereum blockchain, have the scaling and Transaction fee problems exacerbated.

The changes brought in by the eleventh Ethereum hard fork on Thursday will fix many of the problems. It means that with every transaction, Ether-Coins are “burned” or destroyed and the transaction fees become much more predictable by changing the way they work.

The “London” hard fork consists of five different components, the so-called Ethereum Improvement Proposals (EIPs), each of which changes the code in different ways. However, the main focus of most of the users and viewers has been on the EIP-1559, which is changing the way transaction fees are incurred.

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The handling of gas prices

EIP 1559 - Ethereum london hard fork price prediction for gas fees troubles miners - ETH 2.0 incomingPreviously, users participated in an open auction; Users would bid on miners and suggest transaction fees (gas prices) in an offer with no price recommendations. The nature of the transactions created a competitive situation where some users tried to prioritize themselves within the block by paying a premium over their bid.

EIP-1559 eliminates the blind per-block auction method and instead implements a system in which the Ethereum protocol uses an algorithm to analyze total demand on the network and calculate a corresponding transaction fee. While this doesn’t mean it will get cheaper for buyers per se, it should eliminate the massive price spikes and help offset the fees. It can be assumed, however, that EIP-1559 will reduce gas prices, because the “tips” had significantly increased the average price, because sometimes people are willing to pay a lot to get into a block, ideally this will now go through fixed the creation of a basic fee. However, the protocol still allows for tipping, which would allow users to continue to skip the line if they are willing to pay extra, albeit to a lesser extent. Thus, while Ethereum london hard fork price prediction for gas fees troubles miners, it’s not the end… yet.

About half of the block memory is still available to the old “tip” system. However, the new code causes the blocks to stay half full to mitigate and prevent price spikes between blocks and to keep transaction fees more stable.

The dynamic block size, which adapts to the demand, should lead to the cryptocurrency stabilizing in terms of transaction fees. Matt Hougan, the CIO of Bitwise Asset Management, compares what is happening with the prices of a ferry for the passengers. If the price is ultimately too low, the ferry needs as much space as possible to cope with the influx of people who want to travel at that price.

EIP-1559 sounds pretty simple in theory, but it’s a really elegant design solution to a problem that has plagued Ethereum since its inception. The technical implementation was of course not nearly as simple.

 

EIP 1559 – Ethereum london hard fork price prediction for gas fees troubles miners

Ethereum deflationary?

EIP 1559 - Ethereum london hard fork price prediction for gas fees troubles miners - ETH 2.0 incomingEIP-1559 has the effect that the ether that would have gone to the miner in the previous iteration is now “burned” and permanently removed from the network. While some view this as a potentially deflationary mechanism that causes prices to rise due to decreased supply, not all agree with this finding.

Ethereum can only be deflationary if the amount of burned ethers exceeds the amount of new mined ethers. However, this can only be the case in times of high transaction fees. Certainly future forks will advance this mechanism even further, especially since the transition to the Proof of Stake will fundamentally change the nature of Ethereum.

For now, miners can still hope to win a block and use their computing power to earn newly minted ethers, as well as get tips for users who want to prioritize their position on the block. However, since the “London Hard Fork” came into force, this has already decreased significantly. In the coming months, the importance of miners for the network will dwindle more and more, to the point of complete insignificance with the transition to Ethereum 2.0, which could possibly be completely ready to go as early as 2022. One of the other “London” protocols, EIP-3554, addresses precisely this transition. This particular protocol lays the groundwork for Ethereum 2.0, which would entail a complete overhaul and upgrade of the system when it is finally turned on.

The Ethereum 2.0 network will be structured in such a way that it will transition from the currently used “proof-of-work” mining system to a “proof-of-stake” system. This new system would require users to use the ether they already own to verify transactions and make new coins. It means a monumental change, not only for Ethereum, but also for the entire Defi landscape.

The previous schedule that was given to the miners to prepare for this change was in one year, in the summer of 2022. This deadline with “London” has now been postponed to December, but the last deadlines were often delayed, which is why a start in early 2022 is more realistic. As soon as it is switched on, Ethereum will no longer be minable, which in turn makes the work of the miners unnecessary.

Did you like this article “EIP 1559 – Ethereum london hard fork price prediction for gas fees troubles miners – ETH 2.0 incoming”? Then please leave us a comment and tell us what your think about the future of Ethereum!

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