The much-anticipated EIP-1559 needs to be vigilant

On August 5, the Ethereum London hard fork upgrade was completed, and EIP-1559 was officially launched.

Ethereum has ushered in an unprecedented highlight moment. It seems that everyone is discussing and waiting for the reversal moment-Ethereum surpasses Bitcoin.

Goldman Sachs issued a report saying that Ethereum is the blockchain with the most "practical use potential", and its market value is expected to surpass Bitcoin.

BitMEX founder Arthur Hayes wrote an article discussing the possibility that the market value of Ethereum surpasses that of Bitcoin.

The two principals of Bankless, Ryan Sean Adams and David Hoffman, as the number one milk king of Ethereum, have output such as "Ethereum is the most capital-efficient asset", "It is inevitable that Ethereum surpasses Bitcoin"...etc. content.

It is worth mentioning that since the Chinese encryption world often translates and disseminates Bankless articles, the Chinese-speaking world is also permeated with a mysterious confidence in Ethereum's reversal of Bitcoin.

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The atmosphere group is all in place, and V God, the founder of Ethereum, also bravely stated in an interview with CNN that Ethereum is expected to surpass Bitcoin in market value.

How does Ethereum outperform Bitcoin?

EIP-1559 is undoubtedly everyone's hope. In all discussions about Ethereum surpassing Bitcoin, EIP-1559 will be mentioned: after the implementation of EIP-1559, the basic fee will be burned, and Ethereum will reverse the inflation trend and become deflation Assets, as for the price, of course To the Moon.

For example, Dan Morehead, founder of Pantera Capital, said in an interview that the upcoming London upgrade will help Ethereum catch up with Bitcoin and make Ethereum more like a fixed asset.

The anticipation of Ethereum’s deflation has also evolved into a MEME symbol, and the encrypted Vs put bat and voice emoticons next to their Twitter names 🦇🔊.

But the more I tout Ethereum like this, the more dangerous I feel.

EIP-1559, cheering for tax payment

People always tend to overestimate the short-term impact of an event, but greatly underestimate its long-term impact. It is very appropriate to describe EIP 1559.

This effect can be either positive or negative, although most people see it as a huge boon.

First, we have to understand a real EIP-1559.

The core of EIP-1559 is to change the way users pay for transactions on the Ethereum chain.

In the past, transactions on the Ethereum chain used the first-price auction model, which is easy to understand, and the highest price wins.

The miners choose the packaged blocks according to the user's bid, and get the handling fee paid by the user, which also leads to a serious problem-involution.

Just like taking a Didi car or ordering takeout on a rainy day, the driver accepts the order purely according to the bid price, which leads to the fact that only the "rich" can enjoy the service first, and others have to raise the bid price, which invisibly increases the average cost.

Originally, 20 yuan could be used for a taxi, but in the end everyone had to pay 50 yuan to take a taxi, which was too expensive.

How to solve it?

This leads to EIP-1559, which abandons the first-price auction and adopts the uniform-price auction model to set a basic fee.

This is like in order to deal with the problem of expensive and difficult taxi rides, the Internet company personally came up with a price alliance. Drivers no longer choose passengers based on the price, but directly use the price set by the Internet company. This fee will be based on real-time supply and demand. change.

In addition, in order to meet the needs of some users and to speed up transactions during congestion, miners can also be tipped by tipping.

So, will the miners send a large number of transactions by themselves to raise the basic fee, and the left hand will be the right hand?

Therefore, in order to prevent this, the most ruthless move of EIP-1559 appeared. The miners did not get the basic fee and directly destroyed it. This is also the most controversial point of the whole EIP-1559.

If there is no destruction, it is like the unified dynamic pricing of taxi-hailing or food delivery platforms in the Internet ecosystem, as well as the price increase of tips during peak periods. Once the destruction policy is introduced, the monetary policy of ETH will be changed.

Initially, the purpose of EIP-1559 was to reduce transaction fees, but now everyone is more concerned about whether EIP-1559 can bring Ethereum into deflation and whether the price is TO THE MOON.

In the Bitcoin mechanism, the system only provides a payment channel, and the user directly pays the miners who provide the bookkeeping service, which is equivalent to a service fee.

After EIP-1559, the fees that were originally paid directly to the miners were deprived and destroyed by the "central", which is equivalent to becoming a tax.

Taxes have never been levied only on producers, but also on consumers. Can increasing taxes and reducing the income of service providers reduce transaction costs? To make an analogy, can real estate developers be taxed heavily and lower real estate developers’ income lower housing prices?

It seems that it does not make sense from the basic economic principles, so there is a big question mark here, at least from the current situation of operation, there is no performance of reducing the handling fee.

So why do most currency holders applaud such a "tax policy"?

Without him, it is good for the price of ETH.

In the eyes of most people, all measures that are conducive to the rise of currency prices should be supported. This tax is distributed to all currency holders in the form of burning, which is a feat of mining miners to share gasoline.

If the Internet platform takes most of the basic fees from drivers, it will definitely be criticized as "capital blood sucking" and sympathize with the miners, but if this fee benefits all stock holders, then everyone will think this policy is justified should.

As for the miners, in the face of V God and the strong voice of the Ethereum Foundation, it seems that they can only swallow their anger.

Compared to Bitcoin miners, Ethereum miners have always been relatively weak.

From the perspective of the algorithm mechanism, miners should be the masters of the blockchain, at least partners, but since the difficulty bomb was set in 2015, Ethereum miners are destined to be only temporary workers, and they have not received the "respect" they deserve.

ETH2.0 is destined to split when it comes, and EIP-1559 will preview the contradiction. Now it seems that Vitalik and the Ethereum Foundation have won on the surface, but the consensus is broken, and the counterattack of the miners may be on the way.

A big fork will come sooner or later.

Be alert to the crisis of prosperity

In our previous article "Ethereum's True Competitive Advantage: Ideology", we pointed out that the biggest competitiveness of Ethereum is the ideology of decentralization.

DeFi is also an ideological choice. For example, some purists or top DeFi protocols refuse to develop any applications on networks other than Ethereum. This persistence has greatly widened the moat of the Ethereum network.

All new public chains trying to challenge Ethereum must realize that technological progress is actually the easiest, and ideological transcendence is the hardest.

Correspondingly, the biggest danger of Ethereum is the degeneration of ideology, from a creative and united community to a company controlled by Vitalik and the Ethereum Foundation.

EIP-1559

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ETH2.0

These are the "three small things" that Vitalik and the Ethereum Foundation have been committed to promoting. At present, no one seems to be able to stop the pace, and all non-technical issues are not a problem.

Miners can be sacrificed and abandoned at any time. This is the price on the road to growth. Who will be the next price?

Since EIP-1559, the power structure of the Ethereum system has changed. The single power subject is constantly expanding, printing money with the left hand and taxation with the right hand, similar to a national system.

In 2019, Lane Rettig of Ethereum's core developer EWASM team complained on Twitter: "Ethereum's governance has failed, and it is actually expert rule: a small group of technical experts has the final say on protocol updates."

Compared with the Bitcoin network, which also adopts off-chain governance, Ethereum's "Satoshi Nakamoto" has not retired. Although V God himself is not a dictator, his words and deeds can often affect other people's minds and decisions, especially The Ethereum Foundation has no opinions and is afraid to express opinions and make decisions.

But the amazing thing is that it was precisely during the one or two years when the Ethereum Foundation had no sense of existence (such as 2019 and 2020), that the entire Ethereum DeFi ecosystem exploded.

Throughout history, many great prosperity come from bottom-up barbaric growth, inaction and selfishness, while many tragic tragedies often come from the noble and grandiose dreams and wishful thinking of certain individuals and organizations.

Although everyone from the media to the community is shouting "Ethereum is invincible" and "Ethereum is about to surpass Ethereum", but today's Ethereum is far from "victory", with many problems and a long way to go.

Be wary of potential crises and be wary of flattery.

I wish Ethereum better and better.

Note: The author holds an ETH position, and the market value of the position occupies the first place.