• Ethereum London hard fork is expected to launch very soon, traders move forward with guarded optimism.
  • EIP 1559 protocol upgrade will change the current Ether fee mechanism and monetary policy, likely to make transaction costs cheaper.
  • Goldman Sachs believes Ether could overtake Bitcoin as the network becomes more scalable. 

Ethereum enthusiasts are waiting for the delayed release of the London hard fork while trading with caution. The most notable Ethereum Improvement Proposals (EIP) in the upgrade is EIP 1559. This, combined with the transition to Proof-of-Stake (PoS) is considered equivalent to a “Triple Halving”. 

Ethereum prepares for network upgrade

The upcoming London hard fork is a critical milestone in the Ethereum roadmap leading up to the release of ETH 2.0. It will change the protocol’s consensus algorithm from Proof-of-Work to Proof-of-Stake and restructure the monetary policy. 

Currently, transaction fees are calculated by the concept of the "first-price auction.” Market participants bid a set price for miners to process their transactions and the highest bidder wins. However, this is set to change with EIP 1559. 

The network update will introduce a “base fee” for transactions to be included in a block. Users who wish to prioritize their transactions will have the option to add a “tip” or “priority fee” to incentivize miners for including their transactions in the next block. The higher the tip the bigger the chances for the transaction to be processed. 

EIP 1559 does not directly intend to make gas cheaper. The base fee will fluctuate by up to 12.5% after blocks are more than 50% full, which makes transaction fees predictable and transparent to prevent users from overpaying for gas. 

Among other changes that result from the EIP 1559 upgrade, the most notable one is that 70% of transaction fees on the Ethereum network will be burned, meaning that this supply will be deleted from circulation. The remaining 30% will be delivered to stakers as an additional staking reward, in addition to their regular issuance. 

The significant drop in Ether supply is key to drive Ethereum’s price since it makes it a deflationary asset. 

Popular Ethereum Researcher Nikhil Shamapant, mentioned in his research on EIP 1559  that

While many Ethereum bulls fully understand that EIP1559 will improve Ether as a store of value, I don’t think they are modeling for the further way it affects elasticity of supply. If supply is being removed, it matters more if it’s being removed from HODlers who were already inelastic anyway or speculators who can’t sell that Ether in the future. There is no more inelastic source of supply than nonexistent supply.

The so-called Triple Halving

Given the significance of the upcoming protocol upgrade, the concept of “Ethereum Triple Halving” that started as an analogy on Crypto Twitter has evolved into an analysis of financial flows to predict what will happen to the price of Ethereum by January 2023. 

Ethereum’s Triple Halving has its roots in the reduction in supply, Following a successful upgrade to EIP 1559, a drop in sell pressure is expected. Analysts believe that  a 30% reduction of circulating Ether could take place, which is about half of the effect of a single Bitcoin halving. Meanwhile, the transition to PoS might result in a supply shock equivalent to two halvings. 

The much-awaited London hard fork was expected to go live this month, but after a delay, Ethereum core developer Tim Beiko proposed August 4 as the potential launch date. Other key developers will make a final decision on July 9. 

While the exact date of the network update remains to be decided, US multinational investment bank Goldman Sachs is bullish on Ethereum.

[Ether] currently looks like the cryptocurrency with the highest real use potential as Ethereum, the platform on which it is the native digital currency, is the most popular development platform for smart contract applications.

 

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

Bitcoin price not out of the woods as sidelined investors remain fearful

Bitcoin (BTC) price is still not yet set for a rebound as bears can trip bulls and push the price back below the pivotal level at $36,709. As markets are trying to catch a breather, it does not look like bears will be going away that easily and could pressure BTC price action to the downside. 

More Bitcoin News

Ethereum price at risk of slipping below $2,000

Ethereum (ETH) price action looked to be starting a rebound yesterday as bulls came in late in the US session and pushed price action back above the monthly S2 support level around $2,378. During the ASIA PAC session, however, almost half of the bull pop got erased, and bears are back, putting pressure on S2 to the downside. 

More Ethereum News

Solana beats all other blockchains despite degraded performance, says FTX Sam Bankman-Fried

The Solana network suffered an outage several times over the past two weeks. Users complained about failed transfers, and the Ethereum-killer revealed that DeFi investors drove a spike in complex transactions. 

More Solana News

Crypto.com CEO Kris Marszalek predicts higher institutional investment in crypto

Crypto.com CEO believes that institutional investment in crypto could continue rising in 2022. Analysts have noted that the native token of the Crypto.com exchange did not get negatively impacted after the recent security incident. 

More Crypto.com News

Bitcoin: BTC may capitulate to $30,000

Bitcoin price has dropped considerably over the last three weeks. The recent downswing has made things worse for BTC and hints that a steep correction could be on its way.

Read full analysis

BTC

ETH

XRP