Ethereum network’s London Hardforl is said to be the biggest upgrade before the transition to Proof-of-Stake ETH 2.0. The hard fork is scheduled to commence today that would bring key changes to the ETH blockchain. One of the most talked-about upgrades during the London Hardfork is the EIP-1559 implementation. This Ethereum Improvement Proposal promises to make transaction fees on the network more stable and predictable.
During the peak of the bull season in March this year, the Ethereum network faced several congestions issues because of high transaction fees. Users on the platform bid against others to get their transactions picked by miners, the higher the bid, the higher are changes of transaction processing. This created a long pending list of unprocessed transactions clogging the network. This led developers behind the platform to approve EIP-1559 despite the miner’s opposition.
The EIP-1559 would end the bidding system as users would now directly interact with the network instead of miners. Users would pay a base fee depending on the network activity and a portion of it would be transferred to miners’ accounts. The remaining ETH would be burnt, thus making ETH a deflationary asset. However, it is also important to note that the EIP-1559 would not necessarily decrease the transaction fee as much as it would make it more predictable.
Miners Set to Loose a Significant Revenue Stream
Transaction verification accounted for a significant portion of Ether miner’s revenue especially during peak network usage as transaction fees often crossed the value of the original transaction itself. The implementation of EIP-1559 promises to make transaction fees more stable and might also put a dent in the revenue stream of miners.
Ethereum miners would anyhow go obsolete with the transition to ETH 2.0 as PoS based networks decide miners based on network activity rather than offering everyone a chance to mine the next block. Thus, their opposition to the EIP-1559 upgrade is understandable. The upgrade might not have a direct connection with the ETH price, but the anticipation of the major upgrade has sent Ether prices to two months high.