Ethereum network has completed its upgrade and the EIP-1559 has been activated. The highly anticipated upgrade is a monument for the Ethereum network and the price of ETH rallied before the upgrade.
According to Coinmarketcap, Ether has risen by more than 5% in the last 24 hours to $2787, and it has gained over 20% in the last 7 days. In contrast, Bitcoin has fallen slightly in the last 24 hours to $39,000 and has fallen by 2.7% in the last 7 days. ETH outperformed BTC in the past 7 days.
In this upgrade, 5 Ethereum Improvement Proposals (EIP) are embedded in the code of the Ethereum network. Among them, EIP-1559 is a solution to the pricing mechanism of Ethereum network transactions. The remaining 4 EIPs include: optimizing the user experience of smart contracts and enhancing the security of the second-layer network for fraud-proof (EIP-3198); solving the attacks caused by the current Gas return mechanism (EIP-3529); to facilitate further updates of Ethereum in the future (EIP-3541); to help developers better transition to Ethereum 2.0 (EIP-3554).
In the past few months, the high gas fee and network congestion have become the major concerns of users.EIP-1559 drastically changed the calculation method of transaction fees, making transaction fees on the Ethereum blockchain more predictable and cheaper.
One problem with the upgrade is that it reduces the profits of miners. The burning mechanism makes ETH more scarce. If the block reward is lower than the burned ETH, it may cause deflation. In less than a day after the upgrade, about 3,395 ETH were burnt.
In the long-term, the upgrade is good for Defi and NFTs as it makes the cost more acceptable. Besides, the burn mechanism could help ETH become deflationary, like Bitcoin, making it more valuable. More people are looking into ETH as it is easier to own a whole ETH than a BTC. Healthy fundamentals and a striving ecosystem Ethereum are expected to drive the price of Ethereum higher in the long term
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