Simply put, EIP(Ethereum Improvement Proposal)-1559 affects the economics of ETH.
Here’s how ETH works now(or worked before depending when you are reading this):
When you transact on the Ethereum Network you pay a fee, a “gas fee”. Over the last few months fees have skyrocketed and are inconsistent and change like the wind.
Here’s how the upgrade works:
- EIP-1559 changes this system(When you transact on the Ethereum Network you pay a fee, a “gas fee”. Over the last few months fees have skyrocketed and are inconsistent and change like the wind.) with two main aims:
- makes fees more predictable and reduces the circulating supply of ETH over time(deflationary asset). You will now pay a “base fee” that’s automatically set by your wallet (you can also add a “tip” to speed up transactions).
- Instead of going to miners, the base fee is “burned” by the network — which means it’s permanently removed from circulation. In theory, reducing supply could potentially cause prices to go up, assuming demand remains constant(deflationary asset).
The upgrade is scheduled to go live in 6 hours(at time of writing see countdown below)👇
Burning some ETH with every transaction could eventually make ETH a more deflationary asset. For obvious reasons if the demand for ETH continues to increase(which it will) and supply is being “burned”- this is a only good news for ETH HODLers.
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