3 reasons why the price of Ethereum (ETH) could rise after the EIP-1559 update

The Ethereum network will soon face a major update that aims to completely change the dynamics of the network’s commission collection. With this change, the price of Ether (ETH) may face a significant appreciation in the market.

Called EIP-1559 (Ethereum Improvement Proposal in English), the change aims to create a fixed value for each transaction, which will be preset by the network for each mined block of the cryptocurrency.

With commissions that can easily reach $ 20 in the market, currently the Ethereum network fee is a major problem for the platform, which has a mechanism that prioritizes who can pay more for the transaction.

Ethereum price may go up

Investigator Hasu notes on Twitter that there are three reasons for the ETH price to go up in the market right after the EIP-1559 update. For him, The new fee mechanism is likely to increase the adoption of the cryptocurrency in the market by improving the usability of the altcoin.

“First of all, the enhanced transaction fee mechanism improves the overall Ethereum user experience and may lead to higher adoption at the margin.”

In addition to increasing the adoption of the altcoin ETH in the market, The EIP-1559 update will turn the cryptocurrency into a “productive asset,” according to the researcher.

That is to say, Hasu comments that the update will allow the burning of thousands of units of Ethereum, which will be received through the base fee (basicfee), a fee set in advance for each mined block of the cryptocurrency.

“Second, there is the direct argument that burning the base rate internalizes part of the revenue (in ETH) that miners currently earn. This moves ETH from a non-productive asset to a productive asset, such as a company that starts a new line of business that produces a lot of income. “

Finally, the researcher states that Ethereum may experience a pushback in its cryptocurrency issuance system, which may be reduced and limited as of the EIP-1559 update.

With this major change in the Ethereum network, the altcoin ETH can attract investors’ attention as a valuable asset. Furthermore, with the reduction in inflation, Ethereum would experience deflation with the outbreak of the cryptocurrency.

“By reducing inflation, possibly even making ETH even deflationary, it becomes more attractive as a store of value assets and therefore can broaden its target market.”

The EIP-1559 update, scheduled to be rolled out in July 2021, will be rolled out through the “London” hard fork. Although hailed by investors paying high rates on the network, the EIP-1559 update is causing a lot of controversy in the Ethereum network mining community.

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