EIP-1559 will change the way transactions get processed with added certainty on the network.
According to CoinMarketCap, Ethereum’s trading volume has increased by more than 15% in the last 24 hours. The Ethereum community and its traders have already reacted positively to the soon-to-be-released EIP-1559 proposal. Presumably, the primary reason for traders’ low activity is the price movement that may or may not occur with the ETH/BTC and ETH/USD trading pairs on cryptocurrency exchanges following the network update.
EIP-1559, or Ethereum Improvement Proposal 1559, is the massive Ethereum network update that is primarily focused on changing the current fee mechanism. Following the update, the new fee structure will include a base fee that will replace the current auction-style fee structure, which allows miners to increase their fees by up to three to five times during congestion periods.
Previously, the Ethereum price had increased for 11 consecutive days, totaling a 41 percent gain. However, as the cryptocurrency market and Bitcoin began to lose value, Ethereum’s price fell by 5%. Ethereum is currently trading at $2,480 and is trending downward toward the closest support lines, which are short-term moving averages.
One of the most recent Ethereum Improvement Proposals (EIPs) will seek to alter the blockchain’s fee market mechanism. EIP-1559 will phase out the first-price auction as the primary method of calculating gas fees, in which users typically bid a fixed amount of money to cover the cost of processing their transaction on the Ethereum blockchain.
The EIP-1559 modifies the way transactions on the blockchain are processed by enabling transparent pricing on a base transaction fee paid to miners in Ether to validate the transfers. A small number of tokens will be burned and permanently removed from circulation.
The base fee will increase or decrease by up to 12.5%, depending on the extent to how much demand exceeds the ideal gas limit per block. Following Ethereum’s transition to proof-of-stake, Justin Drake’s model predicts that approximately 1,000 ETH will be issued daily and approximately 6,000 ETH will be burned during the same time period. As a result, the annual supply change for Ether would be approximately negative 1.6 million ETH, implying a 1.4 percent reduction in the annual supply rate.
Wallets