With the launch of London on Testnet and EIP-1559 starting to consume transaction fees, the long-awaited Ethereum upgrade is drawing nearer.
Ethereum’s London hard fork was launched on June 24th on the Ropsten testnet in preparation for the mainnet launch in July.
This upgrade will herald the implementation of the highly anticipated EIP-1559 modification, which will adjust the Ethereum transaction fee calculation system.
The next phase of the London hard fork is slated to be deployed on the Goerli test network, due to take place on June 30th. It will then be launched on July 7th on the Rinkeby testnet and later this month on the mainnet.
Watch The Burn
In addition to changing the fee auction structure, part of the EIP-1559 mechanism is to burn the “base fee” that will deflate the Ethereum economy over time.
A website called Watch The Burn was set up to see the real impact. At the time of going to press, 88,483 ETHs were burned in the test network. At current prices, that’s about $177 million.
Ethereum software solutions company ConsenSys estimates that the annual change in supply will be minus 1.6 million ETH. At current prices, that equates to a consumption of $3.2 billion in ETH, which will reduce the annual supply rate by 1.4%.
If the proof of stake for ETH 2.0 starts sometime in 2022 on the mainnet and no more assets are mined, the deflationary character of the network will continue to intensify.
In February of this year, Predictions Global’s founder Ryan Berckmans explained in detail how he believes that these deflation mechanisms have pushed the price of Ethereum into the five-digit range. He believes this will effectively return ETH to the owners, not the miners, as the fee burn will run out of assets.
Unfortunately, hopes that the upgrade would save a lot of gas fees have been dashed. ConsenSys confirmed that this was not EIP’s intention, adding:
“As a side effect of a more predictable base fee, EIP-1559 may lead to some reduction in gas prices if we assume that fee predictability means users will overpay for gas less frequently.”