EIP-1559 benefits have yet to factor into Ether’s price: Ethereum developer

  • Developer Ryan Berckmans believes that despite Ethereum trading at $1,770, it has yet to receive the price boost that will come with EIP-1559.
  • Berckmans claims that once the proposal integrates into the Ethereum network, the altcoin’s value will stand at over $2,800.

Ethereum Improvement Proposal (EIP) 1559 has been one of the most controversial in the network’s history. While the users and investors could greatly benefit from the upgrade, it could put the miners out of business. However, according to one Ethereum developer, despite the controversy, EIP-1559 has yet to price into Ether.

EIP-1559 is an upgrade by Vitalik Buterin and other developers that seek to change Ethereum’s fee structure. In its current state, Ethereum awards all the transaction fees to its miners. However, in July, the network will undergo the London fork. This fork will launch EIP-1559, ushering in a new era for Ethereum.

Ethereum 2.0 is also set to launch, possibly this year, and with it, the network will migrate from proof-of-work consensus mechanism to proof-of-stake. This will essentially eliminate the miners, allowing the Ether holders to earn part of the fees.

Berckmans took to Twitter recently to explain why he believes EIP-1559 hasn’t factored into the Ethereum market. He explained that this year, Ethereum miners are set to take home over $18 billion. Next year, with Ethereum 2.0 and EIP-1559, this will drop to 0. “I see no evidence in the history of the crypto market or current activity to suggest this is already priced in,” he claimed.

Berckmans, who is an engineering consultant for Ethereum, illustrated that on March 19 for instance, miners received $51 million. He added, “With EIP-1559 and proof of stake, we’d have paid $0 to miners and accrued $25.5M to ETH holders (in one day).”

Will EIP-1559 lead to an Ethereum price surge?

In an earlier Twitter thread, Berckmans had claimed that once EIP-1559 factors in, Ethereum will be worth $2,850. “The price of ETH is below the value of the cash it produces because Ethereum’s fees go entirely to miners, who are on track to be paid 8% of all ETH this year. EIP-1559 and proof of stake fix this,” he stated.

EIP-1559 will redirect 35% of the revenue that miners currently receive to Ether holders, he observed. Proof-of-stake, on its part, will redirect 100% of miner revenue to Ether holders.

Many experts have expressed the belief that EIP-1559 will lead to a surge in the Ethereum price. They observe that with the upgrade, the Ethereum supply will be deflationary, reducing with every transaction. As Vitalik put it, “If Bitcoin with its fixed supply is sound money, then if you have a decreasing supply, does that make us some ultrasound money?”

Edward Moya, the chief market analyst at currency firm Oanda is one of those predicting an Ethereum price spike upon EIP-1559 integration. “Ethereum’s never-ending supply was the least attractive part about it, and now optimism is growing that the world’s most-used blockchain will see a major shift in retail and institutional buying,” he told Business Insider.

Justin d’Anethan, a manager at Equos cryptocurrency exchange concurs. The proposal will make transactions more efficient on Ethereum and make the network more scalable.

“Add to this fewer coins in circulation, and you have a recipe for explosive growth,” he said.

About Author

Steve has been a blockchain writer for four years, and a crypto enthusiast for even longer. He is most excited by the application of blockchain to solve the challenges facing developing nations.

Comments are closed.