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Learn about the "EIP 1559" proposal to reduce the overall supply of Ethereum, and how will it affect?

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 Learn about the "EIP 1559" proposal to reduce the overall supply of Ethereum, and how will it affect?

Last Thursday, a report issued by Grayscale, which provides a group of cryptocurrency investment funds, expected that the next proposed upgrade to the Ethereum blockchain, named "EIP 1559", if implemented, will positively affect the price of the Ethereum currency.

The upgrade, called "EIP 1559", is based on Ethereum transaction fees, combining them together, purchasing Ethereum from the open market and then destroying it, which reduces the overall supply of Ethereum.
Learn about the "EIP 1559" proposal to reduce the overall supply of Ethereum, and how will it affect?

Mr. Tim Ogoliev, CEO of Stack, said about the EIP 1559 proposal, saying:
It's like a company that makes a profit and buys back shares.


 he added:

Burning billions of dollars in Ethereum could raise the price of the ETH digital currency.

The net effect is to increase the value of the remaining shares because the supply has become smaller.

I am very optimistic.


 According to Ethereum's current market cap, which is close to $ 200 billion, the network will burn 1-4% of the supply each year.

Here Ethereum could increase its value due to the shrinking overall supply, as we can see in Bitcoin which has 21 million BTC in total supply.

The EIP-1559 update will make fees less volatile:

Implementing the "EIP-1559" update will introduce specific fees for processing Ethereum transactions, replacing the current auction market facing users with ever-changing transaction fees.

The hope of this update is that imposing specific fees will prevent miners from tampering with transaction fees that take in large amounts from users, making fees less volatile.

This would be a real boon and plus for users who this week had to pay an average of over $ 20 per transaction.



 Instead of a fee to identify buyers and sellers, the network will automatically generate a "BASE FEE" in line with the network's activity.

If the network is occupied, “BASE FEE” will go up.

If the network is quiet, then the “BASE FEE” will decrease.

Users can still send an extra tip to miners for processing transactions, if they wish.

The Ethereum network will use the money raised from “BASE FEE” to buy Ethereum and then burn it.

Ogileaf does not expect that the proposal will immediately solve the high transaction fee problem.

But he said that would make it easier for financial analysts to assess Ethereum and its fees and ensure that the amount of money paid in the fees was not tampered with or was subject to fluctuations, encouraging investors to enter the network.

Eric Wall, Chief Information Officer at Arcane Assets, believes that updating EIP-1559 would be very helpful, and stated in this regard:
I think this is one of the most important proposals for the long-term health of Ethereum, but it will be on par with the move to proof of stakes.


 Why has the “EIP-1559” proposal not been implemented yet?

For one thing: it's not ready yet.

Wall stated:

There is still one pending cybersecurity risk issue with EIP-1559 that needs to be addressed.
After fixing that and getting approved, it should be included in the next Ethereum split, which will be later this year maybe next summer.

 


 The proposal faces stiff resistance from the metal Ethereum, as Ogilvy said:

The miners are naturally resistant as this would result in a portion of the fee revenue being transferred from the miners to the Ethereum holders.

 Many remain excited about the upcoming EIP-1559 implementation.


Tell "Wall":

This excitement alone will increase the price.

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