- Ethereum’s EIP-1559 upgrade kicks in today
- EIP-1559 is part of the London upgrade and sees the roles of miners altered dramatically
- The ETH price has soared past $2,700 in advance of the event
Ethereum’s EIP-1559 upgrade, the major component of the London upgrade, is due to land today in what represents probably the biggest shakeup of its tokenomics in its history. London will activate at block number 12,965,000, which puts it just hours away at the time of writing. The hard fork, which will see transaction fees burnt instead of given to miners, has the prospect of massively reducing transaction fees on the Ethereum platform and represents the first major step on the road to a proof-of-stake conversion.
Miners’ Role Reduced in New Format
The reason why EIP-1559 is so revolutionary is because the role of miners is being rapidly altered. Ever since the first Ethereum block was mined on July 30, 2015, miners have been rewarded according to the proof-of-work consensus mechanism – they have been rewarded for mining the next block in the Ethereum blockchain and also paid the fees set by those transacting on the chain.
When EIP-1559 hits however, the much-reduced transaction fee, renamed ‘base fee’, will be burnt instead of being given to miners. This is estimated to reduce their income by some 30%, although a discretionary tip can be given to miners. The mechanism also has the potential to turn Ethereum into a deflationary coin over time as the amount of ETH being mined is less than the amount getting burnt.
Will EIP-1559 Usher in a ‘Sell the News’ Event?
Understandably, many miners were against the upgrade but the EIP still passed. These disgruntled miners could still undermine the fork by mining the old chain, but this would be counterproductive as the rest of the crypto world will be focusing on the new chain created by the London upgrade. The Bitcoin-Bitcoin Cash and Bitcoin Cash-Bitcoin SV hard forks are examples of where the less supported branch continues to be mined.
Ethereum soared past $2,700 yesterday in the run up to the EIP-1559 implementation, which could witness a ‘sell the news’ event as the moment approaches.