Ethereum: EIP1559 arrives and can truly launch the token

Ethereum has been, lately, positively in the center of the crosshairs, between use in DeFi and Non Fungible Tokens, that is, the unique non-fungible tokens. Now comes an innovation that can greatly improve its use, placing it in a better position than even BTC, and which will be implemented in July with the London Hard Fork.

A major problem with using virtual currencies as a payment tool is that commissions are paid to miners based on the supply and demand for this service. If there is a large service offer, with many miners and little demand for transactions, then the fees are low, but if the opposite happens, i.e. there is little service offer and a lot of demand, then the fees are skyrocketing limit making it not convenient to use the token as a payment tool.

Here then comes the EIP-1559, which literally means "Ethereum 1559 improvement proposal". As for the transaction fees, these are divided into two parts:

• base fee, i.e. an equal commission for all, algorithmically calculated to maintain the capacity of use of the system at 50% and equal for all miners working POW. However, the base fee is not sent to the miners, but is burned by the system, that is, it is destroyed ;
• tip fee, that is the possibility, for those who need a particularly fast transaction, to add a "Tip", a tip, to the basic commission to entice a miner to check it immediately.

In this way the offer of the service is stabilized, as well as the prospect of remuneration of the miners. In addition, EIP-1559 provides the possibility of blocks of variable size, avoiding a dispute that has resulted in hostile hard forks in other virtual currencies.

The fact that the base fee is burned makes the currency even more strongly deflationary: practically ETH becomes a consumable good in transactions, therefore increasingly scarce. the base fee is therefore a direct incentive to increase the token price, but also therefore to the miners to increase their POW commitment.

This is therefore a big change in the concept of virtual currency governance. The stabilization of the Fee will lead to an improvement in its use, but, if this happens, we will have a deflationary push and a push to increase the value of the token which, theoretically, pushes in the opposite direction, at least in the medium term.

However, the ETH quotation is giving satisfaction to the owners….

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The article Ethereum: EIP1559 arrives and can really launch the token comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/ethereum-arriva-eip1559-e-puo-veramente-lanciare-il-token/ on Mon, 08 Mar 2021 07:47:24 +0000.