21.05.2024

Upcoming London Hard Fork Will Reduce Ethereum Fees

According to insiders, the long-awaited improvement to EIP-1559 will be implemented in the London hardfork, which will help reduce the cost of gas on the Ethereum network.

The crypto industry has been discussing a proposal to improve Ethereum (EIP) 1559 since the launch of the ETH 2.0 network in December 2020. This initiative will help save on transaction costs in the second most popular cryptocurrency ecosystem.

In recent months, the high cost of ETH transactions has grown into a huge problem for users and projects built on the ecosystem.

The rise in cryptocurrency prices and the boom in the decentralized finance (DeFi) segment are driving up demand for Ethereum and increasing network congestion. As a consequence, gas commissions are breaking record after record. According to BitInfoCharts, now you will have to pay an average of $ 17 per transaction. Earlier this month, values ​​reached $ 25.

The cost of transactions on the Ethereum network. Source: BitInfoCharts

EIP-1559 introduces a mechanism for adjusting the current auction process that determines the cost of transactions. Commissions will be dynamically adjusted so users can pay the lowest block rate.

Predictions Global founder and Ethereum developer Ryan Berkmans suggested that the update could be launched in July as part of the London hardfork.

Good for Ethereum

Although EIP-1559 is not directly related to the ETH rate, it will have a positive effect on the supply side. As a result of the improvements, fees will be dynamically burned, reducing emissions before running the proof-of-stake cosensus algorithm.

Berkmans added that with the upgrade, second-tier providers will benefit from scalability;

“EIP-1559 will help scale Ethereum this year by allowing tier 2 developers Arbitrum and Optimism to safely move their transactions to the next ethereum block. These two solutions are vital for ethereum’s scaling this year, so EIP-1559 is also needed. «

Earlier this month, the developer suggested that the upgrade could push the value of ETH towards $ 20,000 in the long term, because the coin holders will benefit from the burnt fees, not the ether miners.

Bullish Burning Fees

Framework Ventures co-founder Vance Spencer speculated that the massive flaring of ETH fees would trigger a «wealth tsunami.»

It is now assumed that miners are selling the earned ETH to cover costs. Without this pressure from sellers, the asset will have more room to grow, especially after the move to Proof of Stake (PoS) consensus.

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