EIP-1559 Upgrade’s Impact On ETH Price, Transactions & Mining
A much awaited Ethereum upgrade EIP-1559 went into effect in the first week of August as part of the London hard fork. At the time of writing, the fee burn mechanism implemented with this upgrade is working smoothly. Burning over 3 ETH per minute in the past 24 hours.
Now that everything is working, the question is what the impact has been on the network so far. A big upgrade of this size is bound to have significant effects on a network like Ethereum. Yes, it has. EIP-1559 has Brought some noticeable changes to the network. This ranges from the price of the token to how transactions are being carried out. And even down to how much miners are being paid per block for their mining activities.
ETH Supply
One big change on the network has been the reduced supply of coins. The count of ETH coins burned so far as at the time of this writing has now passed 44,450. Prior to the upgrade, this amount of tokens would have gone into circulation. This would happen by way of the ETH being paid to miners for the blocks they mine.
This indicates just how much ETH was being pumped into circulation through mining. In the span of a week would have seen over 44,450 new ETH sent straight into the market.
The token burns are essentially coins being sent to addresses with private keys that cannot be accessed. Thus removing the coins sent to those addresses out of circulation forever. Now, a third of ETH gotten through mining that would have been put into the market is removed from circulation. Resulting in an approximate 30% of total net issuance.
Ethereum Becoming Deflationary
While the whole network is not totally deflationary yet, there have been instances where blocks have become deflationary. Some cases have seen the fee pressure following the EIP-1559 push the ETH burned higher than the two ETH that is issued per mined block in the Ethereum network. Although this has only happened in a handful of instances, it shows that Ethereum has the potential to become deflationary over the long term.
This reduced supply will lead to an increased value of the digital asset. ETH investors will see more value in the asset due to the possibility of there being more demand in the market than there will be supply. Thus leading to a scarcity of the asset that would see the price shooting up.
The price of the digital asset has continued to maintain upward momentum for the better part of this week. At the time of writing ETH trades $3,268 with 5.28% gains on a weekly chart.
