The Next ETH Upgrade Could Pump The Price By Burning Coins

The next ETH upgrade could boost the price by burning ETH coins each year while experts remain bullish about EIP 1559 noting technical and political barriers to overcome before it is implemented so let’s read more in today’s Ethereum news.

As per a recent report by Grayscale, the EIP 1559 is predicted to create a “positive feedback loop for Ethereum’s price” and experts Tim Ogilvie and Eric Wallet both agree that the EIP upgrade is “bullshit.” The technical feasibility and the miner resistance hinder the implementation of the upgrade. Grayscale also reported that the proposed upgrade to the Etheruem upgrade will create a positive feedback loop on the ETH price. As per the upgrade, the ETH improvement proposal EIP 1559 will make the blockchain use transaction fees to buy ETH on the open market and then destroy it thus reducing ETH’s overall supply. The CEO of Staked, Tim Ogilvie said:

 “It’s like a company that earns a profit and buys back shares.”

One of the most exciting features of EIP1559 is the BASEFEE opcode

It will allow smart contracts to estimate congestion (by comparing historical basefee behavior) and programmatically adjust parameters such as dispute periods in optimistic rollupshttps://t.co/fLBUmUQKeY

— Georgios Konstantopoulos (@gakonst) January 25, 2021

Burning billions of dollars in ETH could pump the prices and the effect will be that the remaining shares increase in value because the supply will get smaller:

 “It’s extremely bullish.”

He estimated that with the ETH current market cap of $200 billion, the network will burn 1-4% of the supply every year:

 “If you like BTC’s hard cap at 21 million tokens, you’ll love ETHs declining supply.”

Implementing the EIP-1559 will introduce a new fee for processing ETH transactions and will replace the current auction-style market that will confront users with ever-changing fees. The hope is that introducing the fee will stop miners from manipulating transaction fees that extract huge amounts of money from the users and will make fees less volatile. This will be a good sign for the users as they were paying on average, fees of $20 per transaction.

We had our 7th EIP-1559 implementers' call today 🔥

Agenda: https://t.co/pFdQj5RbWV
Recording: https://t.co/g9qkm2uu67

Summary below 👇🏻 https://t.co/AQ2soPXaNz

— Tim Beiko | timbeiko.eth (@TimBeiko) December 3, 2020

Instead of buyers and sellers setting the fees, the network will generate a “basefee” price in line with the activity of the network. If the network gets busy, the BaseFee will increase. If the network is quiet, the Basefee will go down and users will still tip miners more money to process transactions but it is not necessary.  Eric Wall from Arcane Assets commented:

“I think this is one of the most important proposals for the long-term health of Ethereum, on par with the move to proof-of-stake.”