EIP-1559 upgrade: destroy billions of ETH every year, or bring a price bull market

Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.

summary

Editor's Note: This article comes from

Golden Finance

Golden Finance

, reprinted by Odaily with authorization.

summary

1. A recent report by Grayscale predicts that after the launch of EIP-1559, the price of ETH will form a "positive cycle".

2. Ethereum experts Eric Wall and Tim Ogilvie both believe that EIP 1559 will bring a bull market.

3. The application of EIP-1559 is hindered by technology and miners.

According to the content of the EIP-1559 upgrade, the Ethereum blockchain will use Ethereum transaction fees to purchase ETH on the open market, and then burn it to reduce the total supply of ETH.ETH。”

Tim Ogilvie, CEO of Staked, an ethereum infrastructure services company, told Decrypt: "The process is like a company making a profit and then buying back stock."

According to Tim Ogilvie, burning billions of dollars worth of ETH could drive up prices. And this is the net effect, i.e. the remaining ETH value will increase due to the reduced supply. "

"EIP-1559 will bring huge benefits," Ogilvie said.

He estimates that the ETH market cap is currently close to $200 billion, so Ethereum will burn 1-4% of the supply every year. Ogilvie said: "If you like the BTC 21 million total supply mechanism, if the ETH total supply will continue to decline, you will also love it.

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After the application of EIP-1559, the fluctuation of ETH transaction fees will be smaller

After the application of EIP-1559, the Ethereum transaction fee will be fixed, replacing the current auction-style market, in which user transaction fees are constantly changing.

The current transaction fee is set by buyers and sellers, and after the EIP-1559 upgrade of Ethereum, it will automatically generate the price of BASEFEE according to the activity of network transactions. If the network is busy, BASEFEE will rise. If the network has a low volume of transactions, the price will drop. Users can still pay extra fees to miners to speed up transaction processing, but this is not required.

The Ethereum network will use the income of BASEFEE to buy ETH and then burn it.

Ogilvie does not expect the problem of high transaction fees to be solved immediately after the launch of EIP-1559.

But he said EIP-1559 would make it easier for financial analysts to value ETH because they can be sure that transaction fees will not be manipulated, there will be less volatility and more investors will use ethereum.

Eric Wall, CIO of Arcane Assets, a cryptocurrency fund management company, also believes that EIP-1559 will bring a bull market. He told Decrypt: "I think this upgrade is very important to the long-term healthy development of Ethereum, and its importance is no less important than the transition to Pos."

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Reasons why EIP-1559 has not been applied for a long time