Ethereum fans rejoice! EIP-1559 upgrade is live on the final testnet. The update slated for 4th August is essentially round the corner.
Also known as Ethereum’s London hard fork, this upgrade will introduce a “base fee” instead of the existing first-price auction fee. Essentially, Ethereum’s network will go into a deflationary state. The larger the number of transactions, the more pressure burning of the base fee will have on the overall Ether supply.
Ethereum’s EIP-1559 upgrade may not necessarily reduce fees in the network. This is because, according to ConsenSys:
“As a side effect of a more predictable base fee, EIP-1559 may lead to some reduction in gas prices if we assume that fee predictability means users will overpay for gas less frequently.”
Following this upgrade, the base fee will be burned, which will affect the supply of ETH. To monitor this effect over time, a website will log this mechanism in action on various testnets. As of now, more than 89,000 ETH has been burnt on the testnet. The valuation of the amount burned is close to $185 million at current prices.
The Ethereum’s EIP-1559 upgrade will have a bigger effect when the network switches from PoW mining to PoS consensus in the second half of 2022.