🦄 Here’s How EIP-1559 Changes the Economics of Ethereum
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NEWS The price of Ethereum’s Ether has been rallying in the lead-up to the EIP-1559 upgrade.
PRICES ETH crossed $2,500 for the first time since June 16 over the weekend — that’s a 47% increase from $1.7K on June 22, the lowest since hitting an all-time high above $4.3K on May 12.
PRESSURE Analysts and traders speculate Ethereum’s London upgrade is driving the rally, as one key piece in the change will prompt part of ETH spent in transactions to burn. If the amount of ETH burned is higher than the amount of ETH issued, a lower circulating supply of the cryptocurrency could put upward pressure on its price. That change happens tomorrow.
BULLISH There’s a bullish case for ETH, and it’s being defined by terms such as ultrasound money, triple-halving, and deflationary asset.
PRICE GO UP? Ethereum’s London hard fork is set to execute on August 5 and the included EIP-1559 upgrade has been hailed by many as a game changer for the world’s second largest cryptocurrency. Because the upgrade sets a base transaction fee that gets burned by the protocol, some are saying that ETH will now be deflationary, meaning there will be fewer tokens on the market, which could push the price of ETH up.
BUT WAIT While it’s a compelling argument, investors should be aware that these are actually long-term structural changes to the network and the effects are unpredictable.
ANTICIPATION With anticipation building about EIP-1559’s effect on ETH and gas prices, here’s what users should expect.
PREDICTABILITY First and foremost, if you have ever been confused by Ethereum gas fees in the past, the upgrade which includes EIP-1559 is meant to make gas fees more predictable and the user experience less complex. Rather than have users bidding against each other, racing to be included in the next Ethereum block, they will be able to have a better estimate of what gas price will get their transaction confirmed,
NO MORE GUESSING “People are guessing what other people guess they will pay for the fee,” said James Hancock, a developer who coordinated Ethereum’s All Core Devs meeting. But no longer with EIP-1559.
TLDR At this point, we really shouldn’t be surprised when Mark Zuckerberg courts controversy. But on July 28, he actually told investors on an earnings call that Facebook would become a metaverse company in the future. Huh?
TRANSITION Maybe Zuckerberg was just tossing off the latest buzzword to goose Facebook’s stock. Or maybe he truly believes that in the years to come Facebook will “transition from a social media company to a metaverse company.”
POWERHOUSES You can imagine the reaction at Web 3.0 powerhouses like Aave, Sushiswap, and Yearn Finance. They’ve been assiduously constructing a decentralized, virtual experience utilizing the Ethereum blockchain.
🦄 Here’s How EIP-1559 Changes the Economics of Ethereum (Hint: Lower Gas, Maybe)
In this week’s research piece, Marcus Sandstrom, co-founder of Viseo.se, provides an invaluable look at how the London upgrade will rewire the economics of Ethereum. It may have a big impact, especially when it comes to gas prices. A must-read on this historic week.
Defiers may be a disparate, opinionated bunch but there is one thing we can all agree on — Ethereum gas prices are a real drag.
Just look at what’s happened over the past few months. Gas prices have ping-ponged all over the place, turning off users from doing all the cool things Ethereum was designed to support, such as minting NFTs, sending money, or playing with DeFi apps and services. Volatile fees have also been a boon for other blockchain projects like Solana and Cardano, which are trying to one-up Ethereum.
The bottom line is that gas prices — essentially, the cost of processing transactions — are preventing Ethereum from truly being Ethereum. Yet this week we may finally have a solution: It’s called EIP-1559, and it is the mother of all updates for the Ethereum blockchain so far.
What is your position at Sushi and what does your day to day usually look like? Sure! I work as a Solidity developer at Sushi, so I research improvements to our current contracts as well as discover creative ways to build new contracts to support our product launches.
The second quarter of 2021 was the biggest one yet for decentralized finance (DeFi) protocols on the Ethereum network.
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🧑💻 ✍️ Stories in this newsletter were written by Dan Kahan and YYC Trader, and edited by Bailey Reutzel and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr).