According to recently announced information, a global update of the Ethereum blockchain is planned for July 2021. This decision wasn’t made suddenly, and the developers’ of the largest (by capitalization) altcoin at the moment plans were never hidden: the EIP-1559 – or Ethereum Improvement Proposal – update became public back in 2018, announced by Vitaly Buterin, one of the Ethereum project founders.
After the implementation of the planned innovations, the system of commissions within the network will be completely changed, and part of the commissions that miners receive as payment for processing transactions at the moment will be completely burned. The final decision to include EIP-1559 proposal to upcoming system update was made at the altcoin developers’ conference on March 5.
Sergei Troshin, head of the Six Nines data center, explained that the time has come to implement the update, and there is no need to hesitate with this decision, continuing the disputes that have been going on for more than two years. According to him, users are no longer willing to pay record commissions for transactions within the network, which reached $20 – due to such indicators, situations when the commission for a transaction exceeded the size of the transaction itself could arise in the network.
In the end of February, Ethereum overcame a period of correction, when the value of this digital coin dropped to a local minimum at around $1.31 thousand. However, according to Troshin, the cryptocurrency managed to completely recover – and one of the key factors in it was the news about upcoming EIP-1559 update. Troshin particularly noted the reaction of quotations to the news about system for calculating commissions change: according to Coingecko, Ethereum grew by 18.9% over the weekend from March 6 to 9, from $1.53 thousand to $1.83 thousand.
The reduction in transaction fees will certainly interest new market participants, Troshin said, even though the profit of the miners serving Ethereum network will be reduced due to the fact that the mining of blocks will become more difficult.
The founder of Listing.Help and Jets.Capital Sergei Khitrov, in his turn, believes that upcoming update will create some kind of deflationary mechanism in Ethereum network, and this will be made due to asset shortage appearance. As an example, Khitrov cited the opinion of Ryan Berkmans from Predictions Global, who predicted a rise in Ethereum price to $20 thousand after the upgrade implementation, recalling also that the value of an asset multiple increases with a decrease in supply along with demand preservation.
At the same time the founder of the STASIS stable cryptocurrency platform, Gregory Klumov, was very skeptical about introduction of EIP-1559 update. At the moment, the global market in such a phase when traders grab on to any information that gives them hope for price movement along the path of least resistance, he said. And this behavior clearly signals the late stage of the bull market, when large players have to create excitement and close their positions. Against this background, Klumov called the news from Ethereum “short-term manipulation”. “It should be understood that during the late bull market, you shouldn’t flatter yourself and run to buy ether because it will burn something”, – he also said.
The Block portal already noted the separation of Ethereum miners after introduction of EIP-1559 update. Sparkpool and F2Pool, two of three largest Ethereum mining pools, publicly announced their position. And if F2Pool, which accounts for 11% of the network hashrate, in “Staying on the (b)right side of history: EIP-1559” article claims that the news is even more than good, Bitfly, the operator behind Sparkpool mining pool, which is the second largest Ethereum pool with 24% of the network hashrate, claims that EIP-1559 is associated with global risks.
“Today, the general community along with core developers are siding with evolving Ethereum to include EIP-1559. It is important to side with the users and core contributors”, – says the F2Pool “manifest”. But Bitfly’s Twitter gave us a completely different view: “We have been observing the situation within the community and would like to state that Ethermine is against adopting EIP-1559 in its current state because we believe that Ethereum’s future may be at risk”.
According to Sparkpool experts, the extent to which the proposed protocol update can reduce the miners’ transactional income is completely unjustified.
Something similar we saw in 2017, when the cognate situation developed with Bitcoin. The network of the first cryptocurrency then split, and its new Bitcoin Cash hard fork appeared. The reason for division into two camps was an emerging problem of low transaction speed due to heavy loads on the network. And if some were sure that the answer to all questions would be a hard fork with a block size of 8Mb creation, others believed that the bitcoin block size should be increased to 2Mb without generating a hard fork or something like that.
However, experts don’t think that EIP-1559 update will divide Ethereum community as much. Sergei Troshin, for example, indicates that EIP-1559 is an evolutionary development of the project, not the revolutionary one, as it was back in 2017. He is also sure that Ethereum users perfectly understand why the developers are implementing the token burning system, so there is absolutely no need to be afraid of splitting the blockchain of the cryptocurrency.
By Alexander Kurikh