The long-awaited gas-saving upgrade for Ethereum could be just a few months away now according to industry insiders.
Ethereum Improvement Proposal (EIP) 1559 has been the most talked-about upgrade for the network since ETH 2.0 was launched on Dec. 1, 2020. The EIP tackles the debilitating problem of high transaction fees which have strained the network in recent months.
The surge in prices and a booming DeFi sector have put a huge demand on Ethereum. As a consequence, gas fees have skyrocketed to record levels. According to BitInfoCharts, the average transaction fee is currently $17. This cost has peaked at $25 a number of times this month, however.
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 suggested that the upgrade could be launched in July with the ‘London’ hard fork.
Positive Effects on Ethereum
While EIP-1559 will not have any direct impact on ETH prices, it does have an effect on the supply. The proposal would dynamically burn fees which should eventually reduce issuance over time when proof-of-stake gets underway.
Berckmans added that there will also be scaling benefits for Layer-2 providers from the upgrade;
“One benefit of EIP-1559 is that it helps scale ethereum this year by enabling Arbitrum and Optimism to reliably get their security transactions into the next ethereum block. Since Arbitrum and Optimism are critical to scale ethereum this year, EIP-1559 is too.”
Earlier this month he suggested that the long-term effects of the upgrade could send ETH prices as high as $20,000 due to the fee burning going back to holders as opposed to profits going to miners.
Fee Burning Bullish
Framework Ventures co-founder Vance Spencer suggested that the massive burning of ETH fees will create a “wealth effect tsunami;”
There is the additional 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.
At the time of press, Ethereum was trading at $1,887 after declining 2.5% on the day. The asset hit an all-time high of $2,050 on Feb. 20 according to TradingView. Since the beginning of 2021, Ethereum prices have celebrated a gain of 155%