The cryptocurrency world is constantly changing. New technologies are being released while others are being updated and transforming into something new. And one of the biggest changes coming up is within the Ethereum network, and it is known as EIP 1559.
What is EIP 1559?
EIP stands for Ethereum Improvement Proposal and this specific proposal is number 1559. What this proposal will do is establish a market rate for Ethereum transactions (also known as the building of new blocks on the Ethereum blockchain) while also burning most of the fee which is collected during an Ethereum transaction. This will regulate the fees on transactions within the blockchain.
Why Does This Matter?
Currently, Ethereum is inflationary. This means that new Ethereum is constantly being created and put in the market. As of the writing of this article, 2 ETH are being printed and added to the system every block. This is down from 3 ETH which was what was being added each block to the pool two years ago. And before that, there was 5 ETH per block being added.
Most users don’t notice the current inflation because the user base of Ethereum is constantly expanding as people are adopting the technology and becoming interested in the coin. And although the issuance schedule has decreased, Ethereum has no fixed monetary policy. That means at any time the daily issuance could increase or decrease depending on what the developers want.
And the developers realize that this is a problem, because while it doesn’t harm the system now, it could harm the blockchain in the future, which is why they created EIP 1559, to try and correct this inflation by burning most of the new ETH that is supposed to enter the blockchain each day. And they are wisely doing this before the problem of Ethereum’s inflation begins to effect users.
The Ethereum Miners Are Mad
EIP1559 is great for Ethereum users and investors, because it means their investment will be better able to retain value and, in addition, fees for the Ethereum network will be lower and more universal. This is in stark contrast to the current system where the fees can fluctuate massively based on the number of people currently trying to push through transactions on the blockchain. But while this is great for Ethereum users, and widespread adaptation of the technology, this is not ideal for the miners. Ethereum miners make most of their money off of these fees, and they are watching them literally evaporate before their eyes with this proposal.
But the problem is, as mad as the miners are, EIP1559 is only a precursor of what is to come. Right now, Ethereum is undergoing a massive change from what is known as Ethereum 1.0 to Ethereum 2.0. And the main difference between these two is that Ethereum is being run on a proof of work consensus, and it will change with 2.0 implementation to running on a proof of stake mechanism. When a blockchain changes from proof of work to proof of stake, this means it no longer needs miners to process transactions as stakers will validate them instead. This will put Ethereum miners out of business when this happens, but it will increase the speed of transaction processing thus making it easier for the technology to be adapted in society.
So basically, the miners of Ethereum can be as angry as they want, but whether or not there was EIP 1559 on the horizon, their job would be ending anyways, so it’s probably just better for them to get used to the idea that the days of mining Ethereum profitably are over and move on.
Where Will the Miners Go?
Before you start to worry too much about the miners losing their jobs, know that a lot of cryptocurrencies still do require mining. And even though these miners may paint a sob story of their misfortune, with the equipment used to mine Ethereum, it is fairly easy to switch over to mining a new coin. A prime example is a coin called Ravencoin that several miners plan to swap over to when EIP1559, or Ethereum 2.0 begins.
When Does EIP1559 Begin?
Whether you like the idea of this new protocol or not, it’s coming. According to Ethereum developers, the protocol will take effect in July 2021, which is right around the corner. In the world of software development however, not everything always goes according to plan and several people expect there to be issues with launch due to miner revolts which have been happening since April 2021.
Regardless of how and when the proposition launches, Vitalik Buterin, the creator of Ethereum, says Ethereum 2.0 is on track for release in the first quarter of 2022. This has led to some people speculating online that Ethereum 2.0 may launch before EIP1559, but this likely won’t be the case because, as mentioned above, whether the miners like it or not, their job with Ethereum is disappearing anyways, so few people are likely to feel their pain during their planned “revolts.” You also need to remember that the miners have spent the last year getting rich off the coin, especially if they entered the Ethereum mining game during the COVID pandemic as so many did. So there is no reason to feel any pity or worry for “out of work” Ethereum miners.
What Does This Mean For You?
Honestly, the implementation of EIP1559 should excite you, whether you are an investor or user of Ethereum, because it will be better for you regardless. And when it is implemented, many people speculate that the price of Ethereum will skyrocket—but remember, this is just speculation.
But if you do want to invest in Ethereum, now might be the time to do so, because the structure of the blockchain is certainly changing and this could mean big things for the technology. This doesn’t take away from the risk of investing in cryptocurrency though, so ensure that any money you invest in Ethereum you are prepared to lose in its entirety.
Overall, Ethereum is changing, and it is changing now. And even though some of the changes are still up in the air, they are coming whether the miners like them or not. But all of these changes are necessary in order to upgrade the Ethereum system to something that can be widely adopted into society for daily use and secure Ethereum’s place in society.
This article was brought to you by the Provably Fair Bitcoin Gambling on MintDice. Originally posted on the MintDice Ethereum News Blog.