What is EIP-1559? When did it go into effect?



15 listopada 2021
What is EIP-1559? When did it go into effect?

Eip 1559 - all about the update

Cryptocurrencies are constantly developing, which is also part of their functioning, because blockchain chains are getting longer and require more complicated calculations. Many of them have software updates to improve network performance, and it turns out that they also affect transaction fees. This year, Ethereum implemented EIP-1559. What is it when it came into force and what does it change?

What is EIP-1559? When did it go into effect?

EIP-1599 is a noisy hardfork (main chain duplication event with changes to its protocol) of the Ethereum network that has been referred to as London. The main assumption of the event is to modify the mechanism of calculating transaction fees. EIP-1559 entered into force on August 5, 2021.

EIP-1559 Ethereum Update

As a standard, a fee is paid for the execution of transactions with the use of currency, which is included in the Ethereum protocol. According to the assumption, it should enable the user to quickly find himself in the transaction block (in order for the transaction to be saved, it must be included in a new block). However, the payment does not guarantee that our transaction will be processed quickly, especially in the event of network load. For this reason, there is also the so-called miners tip, i.e. an additional fee for miners who will treat our transaction as a priority thanks to the additional funds. Meanwhile, the EIP-1559 update causes Ether allocated to the base fee to be burned. Thanks to this, it will be possible to keep fees low, even in the case of a large volume of transactions and network load. The update may even result in negative inflation, which translates into the strength of the currency.

The update is beneficial for the so-called second layers

The second layers are protocols embedded in the main blockchain chain that allow you to execute transactions much faster and cheaper. An example is Optimistic Rollups, a network that works on the same principle as blockchain in Ethereum. The upside is the increase in the throughput of the main network (Ethereum) and decentralization, as well as the ability to safely return to it. In their case, gas is also consumed (the unit used for the transaction), which contributes to increasing the combustion of Ether.

Previously, gas charges were dependent on demand and supply, however, by updating EIP-1559, they became fixed, depending on the preferred processing time of the transaction and the complexity of the flow. Thus, the Ethereum network has become much more attractive, which contributed to the increase in the price of Ether, but also deflation and the limited supply of the cryptocurrency in question also contributed to it. Currently, one token costs about $ 4,500, while at the same time last year (November 2020) it was only about $ 500.

Despite the significant price increase, users are still very eager to use Ethereum to perform various transactions. However, a question may arise whether it is worth investing in Ether?

EIP-1559 - Is Investing In Ether Profitable With The Upgrade?

The current exchange rate depends on many factors. From around July / August 2021, you could notice a significant increase in the price of the currency, but it still pays to invest in it. It is related to constant deflation. Currently, the growth is not particularly dynamic, but it continues, with XTB specialists speculating that the value of the Ether Token will be around $ 8,000 by the end of 2021. So this is still a great time to invest in this currency.

How to invest in Ethereum? We recommend using our exchange office - Impily. We always offer an average, attractive exchange rate, and we also use advanced security measures. We are a Polish company, so you can use our technical support without language barriers. We enable the exchange of digital currencies on our platform without any commission!

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