The Ethereum Network's EIP 1559 Upgrade Goes Live Without A Hitch
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Over the past few weeks, Ether investors have been hotly anticipating the rollout of a new upgrade by the name of Ethereum Improvement Protocol 1559 (EIP 1559) – expected to improve the user experience and value proposition of the Ethereum network. Happily, the EIP 1559 upgrade – which is also dubbed the London hard fork – has been successfully activated as of yesterday, with the price of Ethereum holding steady post-upgrade.

Interestingly, the price of Ether hiked jumped slightly prior to the upgrade, trading at around USD$2,630 (approximately RM11,103) and is now holding steady around the USD$2,700 mark.

The EIP 1559 upgrade was first proposed by a group of individuals that included the founder of Ethereum, Vitalik Buterin back in 2019, and it sought to change and improve the basic approach for processing transactions in the network.

The key benefit to EIP 1559 is that it aims to reduce network fee volatility and increase market efficiency – and by extension, make the network better to use. At present, this fee is highly volatile primarily because the Ethereum network runs on an auction system where users bid against each other to have their transactions approved and verified by other users (aka miners). As such, the concept of demand/supply kicks in here; transaction fees can soar when the network is busy, but drop tremendously during low-demand periods.

This type of blind auction presents a sort of unpredictability in the way transaction fees are charged. With EIP 1559, the fees can be somewhat “regulated” through the payment of a base fee, which is determined through algorithm programming based on how busy the network is. On top of that, investors will also be allowed to “tip” a miner to request for them to prioritise their transactions. This base fee is then burned, where previously they were given to the miners.

(Image: Medium)

The introduction of the base fee is also expected to inject some form of transparency into the pricing process. Network users will always be informed as to what the base fee is at any given moment, and the price will not spike or tumble abruptly – unlike during bids.

Of course, this is only one of the enhancements that is expected from the rollout of EIP 1559; other supposed benefits include boosting the value of Ether by diminishing the supply of the cryptocurrency.

The full magnitude of the impact from EIP 1559 is still unknown, but this upgrade precedes an upcoming major upgrade: Ethereum 2.0 – an overhaul of the network’s entire infrastructure that is likely to take place by early 2022. Without a doubt, there will be plenty to look forward to in the area of cryptocurrency investment, especially as more people get onboard the cryptocurrency train.

(Sources: Markets Insider, CNBC)

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