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Around 20:00 Beijing time on August 5, Ethereum will usher in the London hard fork upgrade, and EIP1559 will be officially launched on Ethereum. I have introduced EIP1559 many times in previous articles. This is probably the most significant upgrade before Ethereum 2.0 is officially launched. We say it is the most significant because this EIP will completely change Ethereum's fee mechanism, which is very likely to change the total circulation of Ethereum from the current unlimited limit to a constant or even deflationary amount. In the current Ethereum mechanism, when a user conducts a transaction on Ethereum, the handling fee we pay will be paid in full to the Ethereum miners. When EIP1559 is officially launched, the handling fee structure we pay will change to basic fee + tip. The basic fee is what all traders have to pay during this time period, and it is the same for all traders. The basic fee will be adjusted at any time according to the congestion of Ethereum. When the usage rate of Ethereum is >50%, the basic fee will increase; when the usage rate of Ethereum is <50%, the basic fee will decrease. This means that by adjusting the basic fee, the usage rate of Ethereum is kept at half full as much as possible. The tip is at the discretion of each trader. If the trader thinks his transaction is important and hopes that his transaction can be packaged by the miners as early as possible, he can give as much tip as possible to attract miners to package the transaction as soon as possible. The basic fee will be burned by the system, and the tip will be given to the Ethereum miners. From the perspective of the fee structure, before EIP1559, miners received 100% of the transaction fees, but after EIP1559, miners only received part of the transaction fees. It seems that miners have suffered a loss, so when EIP1559 was put on the agenda (probably at the end of last year or the beginning of this year), some large miners expressed their opposition explicitly, and even caused everyone to worry about whether Ethereum would fork. But after several months of preaching and communication, everyone seems to have gotten used to and accepted this fact, so the voices of opposition no longer seem to be obvious recently. In fact, since part of each transaction fee will be burned, this is a good thing for all Ethereum holders, including miners. With the burning of Ethereum, not only can the circulation of Ethereum be maintained at a stable state, but it can even make Ethereum deflationary. This will have a profound impact on the long-term price of Ethereum. An overseas group made a detailed chart to explain the relationship between Ethereum's basic fee and circulation after the launch of EIP1559. We can take a look at this chart: In the above figure, we can see that after EIP1559 is launched, when the base fee of Ethereum reaches 15Gwei, the total circulation of Ethereum will maintain a constant total of 120 million on January 31 next year. If the base fee exceeds 15Gwei, the total circulation of Ethereum will begin to decline after January 31 next year, that is, it will enter deflation mode. Therefore, the basic fee of 15Gwei is a critical tipping point. What is the concept of 15Gwei? As of the time of writing, before EIP1559 was launched, the average transaction fee that users had to pay to miners for a transaction on Ethereum was 37Gwei. So 15Gwei is a relatively low threshold. In other words, after EIP1559 is launched, there is a high probability that Ethereum will become deflationary next year, and it is even very likely that the total circulation of Ethereum will remain stable in the bear market in the future. This means that as long as the Ethereum ecosystem continues to grow, Ether will continue to accumulate value, so as long as the price bubble of Ether is not outrageous, any selling behavior is inappropriate from a value judgment perspective. This will lead to more reluctance to sell Ether, thus giving the price of Ether a more solid support foundation. |
