- EIP-1559, a major ethereum network upgrade, is scheduled on Thursday.
- Some investors are thrilled about the development since it will begin to destroy or “burn” ether currencies.
- Four things you should know about the upgrade, according to Insider.
On Thursday, the ethereum network will receive a much-anticipated upgrade that will change the way transaction fees work and begin to destroy currencies.
It was originally set for August 4, but was significantly postponed.
The update is known as Ethereum Improvement Protocol 1559, or EIP-1559, and it will be part of the “London hard fork” network upgrade.
Transaction fees should be more predictable, according to EIP-1559.
The switch to ethereum is all about making transaction fees more predictable and thus making the network more user-friendly.
Because the network uses an auction method, fees are quite fluctuating.
Users compete with one another to have their transactions processed and validated by miners, or other users.
When the network is crowded, transaction fees can skyrocket.
But, as developers view it, the major issue is that the blind auction approach makes fees extremely volatile and unpredictable.
Instead of making bids, users will pay a “base charge” that will be algorithmically calculated by the network based on how busy it is after EIP-1559.
They will also be able to pay a miner a “tip” to expedite the processing of their transaction.
The concept is that the network’s base cost will be transparent to users as they enter transactions and will not fluctuate from minute to minute.
Users can wait till it is reduced if it is too high.
It will obliterate currencies while maybe boosting ether.
People are enthusiastic about EIP-1559 because it would “burn” or destroy ether, the network’s cryptocurrency.
The base price is not paid to miners; otherwise, they may purposefully congest the network to keep the fee high.
Instead, it’s obliterated.
Some investors assume that the fact that ether’s supply will be limited by burning would result in a price explosion.
However, developers claim that the impact on price is uncertain.
It also depends on factors such as transaction volumes, which impact the size of gas fees and thus the amount of ether destroyed.
“We don’t know exactly what the effect will be in terms of ether burned until it’s deployed,” said Ben Edgington, an ethereum engineer at ConsenSys.
Transaction fees will not be lower for sure.
The ethereum network’s transaction costs may decrease because a more predictable base charge will help consumers overpay less frequently than under the highest-bidder-wins mechanism.
EIP-1559, on the other hand, does not seek to cut transaction fees; rather, it seeks to make them more predictable.
The base charge will fluctuate, rising when the network is busiest and down when things are quieter.
The ethereum network will undergo significant changes in the near future.
EIP-1559 is insignificant in comparison to ethereum 2.0, a major redesign of the network’s infrastructure that developers expect to finish by early 2022.
The network will switch from a “proof-of-work” to a “proof-of-stake” method in Ethereum 2.0.
Miners use massive amounts of computational power to verify transactions via proof of work.
Users will put up ether in exchange for the right to verify transactions and earn currencies under proof of stake.
Developers are also aiming to expand the ethereum network by connecting and adding other side networks.
Insiders on Ethereum believe that this will cut transaction costs and congestion.
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