Ethereum’s London hard fork was launched on June 24th in the Ropsten testnet in preparation for the mainnet rollout in July.
The upgrade will usher in the implementation of the highly anticipated EIP-1559 modification, which will adjust the calculation mechanism of Ethereum transaction fees.
Called in #London!
Welcome # EIP1559https: //t.co/oKhEMR83fz
– Nethermind (@nethermindeth) June 24, 2021
The next phase of the London hard fork rollout is the deployment on the Goerli test network, which is scheduled for June 30th. It will then be launched on July 7th on the Rinkeby test network and later in the month on the mainnet.
Watch “The Burn”
Part of the EIP-1559 mechanism, aside from changing the fee auction structure, is to burn off the “base fee” that will make the Ethereum economy deflationary over time.
A website called Watch The Burn was set up to see this in action. At the time of publication, 88,483 ETH were burned in the test network. At current prices, this equates to around $ 177 million.
Ethereum software solutions company ConsenSys estimates that the annual change in supply will be minus 1.6 million ETH. At current prices, that’s equivalent to burning $ 3.2 billion in ETH, which will reduce the annual supply rate by 1.4%.
The deflationary properties of the network will be reinforced when the proof-of-stake is introduced on the mainnet for ETH 2.0 in 2022 and the asset is no longer mined.
In February, Ryan Berckmans, founder of Predictions Global, described how he believes these deflationary mechanisms could push Ethereum prices into the five-digit range. He argued that this is effectively giving ETH back to the owners, not the miners, as fee burnings make the asset more scarce.
Unfortunately, hopes of major gas savings from the upgrade have been dashed. ConsenSys confirmed that this was not the intention of the EIP, adding:
“As a side-effect of a more predictable base charge, EIP-1559 can lead to some reduction in gas prices if we assume that the predictability of charges means users are less likely to overpay for gas.”
Ethereum prices lackluster
Ethereum prices had returned to psychological levels of $ 2,000 at the time of going to press. The asset is up 4.2% over the course of the day but is still in a downtrend.
CoinGecko has reported a 20% drop in ETH price over the past two weeks. The world’s second largest crypto asset is currently 54% below its all-time high of $ 4,350 on May 12.
It can therefore take a little longer before these characteristics of scarcity and demand are reflected in price developments.
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