Ethereum explain how their ‘world computer’ works
Make the most of your money by signing up to our newsletter for FREE now
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Ether is one of the world’s two most valuable cryptocurrencies, only behind Bitcoin. Investors can currently clinch a coin for £1,941.22, making ETH the only other token on the crypto market to have cracked the £1,000 mark. Now, developers hope to adapt their platform with an update titled EIP 1559.
What is EIP 1559?
Ethereum investors have long-awaited the blockchain’s incoming update, known as the “London hard fork”.
The upgrade is on course to change some of the fundamental processes behind transactions.
London is due out today and includes the Ethereum Improvement Proposal (EIP) 1559.
READ MORE: How does cryptocurrency work?
EIP 1559 countdown: What is EIP 1559? Long-awaited Ethereum upgrade will DESTROY coins (Image: GETTY)
EIP 1559 countdown: Mining Ether at present takes place via bid (Image: GETTY)
EIP 1559 seeks to transform the way investors bid via “gas fees”.
At present, they have to enter bids for miners to pick up a transaction.
Investors enter them manually right now, but EIP 1559 hopes to introduce an automated system.
Automated bidding comes with a flat fee that changes with activity.
EIP 1559 countdown: Ether’s current price and latest trajectory (Image: COINDESK)
EIP 1559’s incoming algorithm will determine a “base fee” that increases with network traffic.
The renewed transparency will provide prices upfront as users go into transactions.
In theory, this should reduce some of the volatility caused by the network’s auction system.
But people can still pay for prioritised mining by offering miners a tip.
Bitcoin price surge as crypto breaks $40,000 for first time in months – INSIGHT
Britcoin POLL: Sunak planning digital currency – do you agree? – POLL
Can you pay Amazon with Bitcoin? Inside company’s crypto ‘ad’ – EXPLAINER
EIP 1559 countdown: The move to burn Ether could see its value surge post update (Image: GETTY)
EIP 1559 will shake up transactions in more than one sense, as it will also destroy some coins.
The upgrade will provide a disincentive for artificial network congestion.
Developers will do so by burning the base fee and keeping it out of miners’ hands.
The move means they don’t benefit from attempts to spike prices by artificially congesting the network.
Burning also provides an opportunity for Ether to deflate.
As supply narrows through burning transactions, ETH could see a surge in price.
Investors would also hold a deflationary asset when inflation is a significant concern, especially in the US.
But the price surge isn’t guaranteed, as experts state it also depends on factors such as transaction volume, which affects gas fees and, in turn, how much Ether each exchange burns.