The countdown to the 11th major update of the Ethereum Blockchaink, also known as the Hard Fork, has begun. This hard fork is called “London” and includes five Ethereum Improvement (EIP) proposals, each of which includes code changes aimed at optimizing and improving the number two currency of the digital currency market. Unless there is a particular problem, this hard fork will be implemented on August 4 (August 13).
One of these important changes is called EIP 1559, which has been one of the most controversial changes among Ethereum stakeholders due to the fundamental redesign of network fees. Here with help an article From CoinDesk, we explore the risks and benefits of this code change for Ethereum investors.
Benefits of EIP 1559
One of the most common arguments against Ethereum as a store of value is its unlimited supply.
Bitcoin, the world’s first digital currency, has created a limited supply program (21 million units), which forms an important part of its reputation as “digital gold”.
While EIP 1559 does not impose a Bitcoin-like limit on Ethereum (ETH), it does provide a mechanism to gradually limit the growth of its total supply, by which a variable amount of ether is released from each transaction.
EIP 1559 simulations as of June 8 show that EIP 1559 activation will burn 2,967,937 units of Ethereum over 365 days, representing a 76% reduction in ether supply growth over that one-year period.
Update EIP 1559, in addition to creating a bitcoin-like narrative for limited supply of ether, is expected to improve transaction waiting times and eliminate commission uncertainty that prevents developers and users from using decentralized applications extensively.
Finally, EIP 1559 is intended to highlight the role of ether as a form of payment for the use of Ethereum computing resources and interaction with the extensive network system of decentralized applications, by requiring transaction fees to be paid solely in the network’s native currency.
EIP Risks 1559
Technology updates are usually risky, and the most important risk that EIP 1559 can pose is related to proposed changes to the system of rewards and payments to miners, which, when EIP 1559 is activated, will reduce revenue. Instead of receiving 100% of the transaction fee, miners will only receive the additional fee that users pay to prioritize the transaction.
Changing the reward system does not in itself affect Ethereum’s ability to process blocks or calculations. But there is a potential for miners to leave the network, sabotage or form a rival blockchain. If a large number of Ethereum miners leave the network or revolt, the blocking time and network security will be severely affected.
For decentralized application developers and users, EIP 1559 may not be as useful on paper. Failure to make changes to fees properly can lead to discouragement for the user and the developer. If that happens, Ethereum’s rivals, including China’s Bainance Smart and Cardano (the two largest blockchain platforms after Ethereum in terms of market value), will no doubt miss out on market share.
To measure the benefits of EIP 1559 and its impact on users in the long run, investors can use the actual number of transactions in EIP 1559 format as a way to understand its usefulness and usefulness in practice, through private nodes or Public Blocker (Explorer) To see.
Finally, activating EIP 1559 can lead to unforeseen bugs or malicious user behavior. During the EIP 1559 testing process, few bugs were found in public and private test networks.
EIP 1559 upgrade is designed to reduce volatility and increase the predictability of transaction fees in Ethereum; But changing the code will create numerous risks and potential rewards for Ethereum, which are not unimportant to watch in August (August to September).