Ethereum London Hard Fork fails to deliver as mass departure of dApps continues


  • EIP-1559 protocol in the London Hard Fork directly coupled fees to the ecosystem applications' usage.
  • Analysts argue that the deflationary effect of EIP-1559 is driving applications to other networks.
  • Nearly $1 billion worth of Ether has been burned since the implementation of EIP-1559, fueling "The Triple Halving" narrative. 

Ethereum Improvement Proposal-1559  (EIP-1559) was one of the much-awaited improvement proposals that went live in the London Hard Fork. Since the protocol was expected to make gas fees more predictable, proponents expected an overall positive impact on the Ethereum ecosystem and Ether prices. 

EIP-1559 labeled as parasitic tax on the Ethereum network by leading on-chain analyst

An independent on-chain analyst, Willy Woo, sparked a debate on crypto Twitter with his take on EIP-1559 and capital rotation out of the Ethereum network. The analyst ran a poll on Twitter asking followers whether they consider EIP-1559 a "parasitic tax" driving decentralized applications to other networks for short-term deflationary effects. 

Though the response to the poll was mixed, the rapid rise of layer-2 scaling solutions and alternatives like Solana, which are incompatible with the Ethereum Virtual Machine (EVM), raises questions on EIP-1559's impact. 

While most blockchain networks benefit from scaling, the Ethereum network suffers from congestion, delays and high gas fees. Traders have noted spikes in gas fees after implementing the Ethereum improvement proposal that was expected to make fees more predictable. 

Network fees hit 100-200 Gwei several times over the past two months given the increasing usage of the Ethereum network in dApps, NFTs, liquidity mining and yield farming. Vitalik Buterin, the co-founder of Ethereum, acknowledged the challenge of scalability and its negative impact on gas fees.

Buterin said,

We've been doing all kinds of incremental improvements to the blockchain clients and the protocol code over the last five years. Ethereum's scalability has increased by about a factor of five since the project started.

EIP-1559 ranks with the most hyped protocol updates. When Ethereum developers floated the proposal, it focused on tackling spiraling gas fees and making it predictable. However, predictability cannot be equated with a reduction in transaction fees on the network. 

Adam Cochran, Partner at Cinneamhain Ventures, an activist venture capital firm, commented on the confusion between high priority and max gas fees. 

Interestingly, Solana's exponential growth is attributed to its low transaction costs and high speed. While Ethereum has relied on Optimistic Ethereum, rollups and zero-knowledge tech to increase speed and lower gas fees, Solana is in a more favorable position as the fastest blockchain network in the world. 

What distinguishes Ethereum from Solana and other competing blockchain networks is its decentralization. 

Like other analysts and proponents in the space, pseudonymous crypto project investor, advisor and trader @iamDCinvestor has accepted the high gas fees as a "trade-off."

Colin Wu, a Chinese journalist, reported earlier today that over $1 billion worth of Ether has been burned since the implementation of EIP-1559. 

The deflationary effect of EIP-1559's implementation fuels "The Ethereum Triple Halving" narrative, which sets a target of $150,000 for Ether's price. The narrative implies that the negative issuance of Ether is likely to increase until "The Merge" or migration to PoS is complete. 

Following the transition to ETH2.0, the supply will have dropped in a volume proportional to three consecutive Bitcoin halvings, sending the altcoin's price to a whopping $150,000. 

It remains to be seen whether the high gas fees will continue to motivate capital rotation out of the Ethereum network or foster the transition to a scalable and relatively low-fee blockchain – ETH2.0.

FXStreet analysts have evaluated the altcoin and predicted that Ethereum is ready to break out and presents a clean and profitable trading opportunity.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News


Latest Crypto News & Analysis

Editors’ Picks

Dogecoin price heads south toward $0.10, DOGE bulls show little opposition

Dogecoin price action points to a continuation of the downside pressure it has experienced over the last month. Little supportive price action exists as bulls continue to disappear and fade away.

More Dogecoin news

XRP price in free fall below $1.00

XRP price continues to show extreme weakness as bears continue to drive bulls into very near capitulation levels. The current Ichimoku Kinko Hyo chart for XRP is the most bearish chart XRP has seen since May 2021. XRP price is at a make-or-break level.

More Ripple news

Cardano bulls bleed as they try to catch a falling knife

Cardano price is currently trading inside the Cloud within the Ichimoku Kinko Hyo system. This is because the Cloud represents an area of volatility and indecision, conditions that aptly describe the current condition of Cardano.

More Cardano news

Shiba Inu bulls can't hold SHIB from dropping to $0.000006

Shiba Inu price continues to follow the path of the aggregate crypto market. However, significant selling pressure over the past four days has weakened bulls' resolve and put significant pressure on any longs who entered the market about $0.00008.

More Shiba Inu news

BEST CRYPTO BROKERS/EXCHANGES



Bitcoin Weekly Forecast: Markets revert to mean, but BTC price remains indecisive

Bitcoin price shows considerable strength after springing from the recent crashes. Still, it is uncertain whether the current bullish impulse will morph into a new uptrend or lead to a more profound decline.

Read the weekly forecast

BTC

ETH

XRP