Tag: Ethereum Improvement Proposal

‘Ethereum Improvement Proposal’ all set to bring major change to crypto world

Banking & Finance

[ad_1]

Read More/Less


Ethereum 2.0’s latest upgrade could make it outperform Bitcoins. Known as Ethereum Improvement Proposal (EIP)-1559, which went live on Thursday, is touted to be the most significant update since the launch of the cryptocurrency.

The upgrade will not only help reduce cost of transaction fees involved on Ethereum network but introduce several other fundamental changes to how Ethereum is perceived. Industry players said with the current updates, Ether stands a chance to outperform Bitcoins.

Key changes

Known as the second most valued cryptocurrency, two of the key changes the update will bring include settling on a fixed base fee instead of an uncertain ‘gas fee’ users pay in ether to miners to process their transactions over the Ethereum network.

This transaction fee tends to increase and change and there is no way the user will know the price before hand. This will be replaced with a fixed ‘base fee’. Over this base fee, the user can choose to pay a tip to speed up the process.

Also read: Ethereum co-founder says safety concern has him quitting crypto

‘Burning’ feature

The other key update is introducing the “burning” feature wherein after each transaction with the miner, a small amount of those tokens would be burned or taken away permanently out of circulation. This will lead to creating a shortage of ether supply in the network leading to increasing value and demand as it becomes rarer.

Additionally, the number of transactions allowed on one block has been doubled. Ethereum’s blockchain settles transactions in blocks or batches. Each block needs to have a certain fixed number of transactions registered to be completed and taken for settlement.

Siddharth Menon, COO WazirX told BusinessLine, “This EIP-1559 is a major overhaul in the fee model. One of the biggest challenges in the current fee model, which is bid based. There was high volatility in gas fees to be paid, which often resulted in transactions taking long to get confirmed or not even getting confirmed. With this new model, the increase or decrease of fee will be more linear and predictable and less volatile thereby enhancing user experience.”

Also read: India must take a holistic view on cryptos

“Ethereum so far has been an inflationary economy which inflated at the rate of approx 2 per cent per year. With this new fee model, Ethereum theoretically can become both inflationary and deflationary, however, practically I believe as there is more adoption in this network, it will be primarily a deflationary economy where supply will always be burned to remain lesser than demand. This could be a great opportunity for long term investors. If more people understand this economics, we could see more volume and price movement for Ethereum,” he added.

Ethereum to outperform Bitcoin

“The upgrade to Ethereum 2.0 will certainly make it more environmentally friendly than the current leader, Bitcoin. Also, the use of block in decentralised finance and its applications will hopefully support Ether’s price movements in the years to come,” Neeraj Khandelwal, co-founder, CoinDCX told BusinessLine.

“Bitcoin is seen as a store of value just like Gold. However, Ethereum has a lot more use cases and adoption led by DeFi, NFT and other Dapps being built on top of Ethereum. This adoption essentially means more demand for Ethereum which will eventually lead Ethereum to outperform Bitcoin. Ethereum Network also called EVM (Ethereum Virtual Machine) is like cloud computing using the Blockchain, and can be compared to Unix servers powering Facebook, Google and other platforms. This is the potential of where Ethereum can go and what the future tech businesses built on Ethereum could look like,” Menon said.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , ,

Major Ethereum upgrade set to alter supply, fix transaction fees, BFSI News, ET BFSI

Personal Finance

[ad_1]

Read More/Less


NEW YORK: Ethereum, the second-largest blockchain network, is about to undergo a technical adjustment that will significantly alter the way transactions are processed, as well as reduce the supply of the ether token and sharply boost its price.

The scheduled coding revamp will go live on Aug. 4.

The upgrade known as Ethereum Improvement Proposal (EIP) 1559 is similar, analysts said, to a bitcoin “halving” event in which periodic adjustments reduced the supply of bitcoin. Each halving helped propel bitcoin’s price to higher records.

While bitcoin is the preferred store of value in the digital ecosystem, Ethereum has emerged as the leading financial infrastructure, settling over $12 billion of daily transactions, according to a Grayscale report released in February this year.

Andrew Keys, managing partner at DARMA Capital, said ether’s current price has yet to factor in the looming software upgrade.

He estimates that the expected software adjustment next week, coupled with another upgrade in the first quarter of 2022, should “easily quintuple the price of ether” by next year. On Thursday, ether was up 0.6% at $2,312.

WHAT IS EIP 1559?
EIP-1559 is a software upgrade that fundamentally changes the way transactions are processed on Ethereum by providing clear pricing on transaction fees in ether paid to miners to validate transactions and “burning” a small amount of those tokens. The burned tokens will be permanently taken out of circulation.

In token burning, miners would typically send the tokens to specialized addresses that have unobtainable private keys. Without access to a private key, no one can use the tokens, putting them outside the circulating supply. By reducing the number of tokens, the currencies that remain in circulation become rarer and more valuable.

WHAT IS THE CURRENT PRACTICE ON THE ETHEREUM BLOCKCHAIN?
Currently, a person or entity trying to send a transaction on the Ethereum network must pay a so-called “gas fee” in ether to miners to process their transactions.

But the exact transaction fee is not clear and market participants say there is no way of knowing the price beforehand.

This creates two issues, said Matt Hougan, chief investment officer at Bitwise Asset Management.

“First, it introduces a major uncertainty around whether you’ll get your transaction processed in a timely fashion,” he said. “Second, people overpay because they don’t know the clearing price and they bid too much to make sure the transaction is processed.”

WILL MINING, BUYING AND SELLING ETHER BECOME EASIER?
EIP-1559 changes this mechanism by setting a “base fee” paid to miners for each transaction, part of which will be burned. Participants can also include an optional “tip” with their base fee to speed up the process, if desired.

Another adjustment, market players said, is doubling the amount of space available in each block. Blockchains like Ethereum settle transactions in batches or blocks. Each block can contain only a certain number of transactions.

Blocks are propagated on Ethereum every 17 seconds and EIP 1599 is going to be deployed on Block 12,965,000, which is estimated to happen on Aug. 4, said DARMA’S Keys.

There was a bug bounty, which paid people if they found bugs. That has process has been completed.

WHAT DOES IT MEAN FOR ETHER SUPPLY?
Bitwise’s Hougan cited estimates that EIP-1599 will reduce ether’s overall inflation rate from roughly 4% a year to 3%. That is about half as large a reduction proportionately seen in bitcoin “halving” events, he said.

WHAT DOES IT MEAN FOR INVESTORS?
The change should make it easier for investors to understand the value of holding ether. Hougan said EIP 1559 should increase transactions on the Ethereum network and raise the use of ether, which will likely help bring a wave of institutional investors into the market.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,