Bitcoin and Ethereum hit their highest value in more than two months, as the market faces uncertainty because of regulations in the United States’ infrastructure plan. Early Sunday morning, bitcoin surged as much as 3.1% to over $45k, the highest price since May. Ethereum gained as much as 3.5% reaching $3,191 after its London upgrade. Other tokens like Binance Coin, Cardano, XRP, and Dogecoin have also rallied in the past week. A big reason that continues to cast doubt in the market is the U.S. infrastructure bill, which addresses reporting requirements for cryptocurrency transactions and tax collection. It is anticipated that the proposed crypto tax will offset some of the expenses of the $550 billion infrastructure plan. On the other hand, Ethereum network upgrade introduces some interesting features, that solve some old issues, making the block size more flexible and splitting the fees into two different parts, one which is burned and is set algorithmically by the network based on past demand and the other is given as a tip to the miner. The Ethereum network has a long-standing problem with scaling and its highly unpredictable and sometimes exorbitant transaction fees. The upgrade makes the protocol less intimidating to use, as an automated bidding system that sets a fee that fluctuates, based on how congested the network is, instead of users bidding on how much they’re willing to pay to have their transactions verified by a miner.
Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet.
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On August 5, Ethereum got its much-anticipated update, which will destroy ether tokens and increase the value of the second-largest cryptocurrency. EIP 1559, also known as the “London Hard Fork,” serves as a precursor to the major upgrade known as “Serenity,” also known as Ethereum 2.0. Serenity is scheduled for the end of 2021 and will convert Ethereum’s blockchain from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) blockchain.
The upgrade also changes the way transaction fees are calculated.
Until now, users had to bid on how much they were willing to pay to have a transaction picked up by a miner, making transactions costly. Users who wanted to have their transaction prioritized would have to higher pay a fee in order to get a preferred status. Now the new upgrade makes fees more predictable, as fees are automatically calculated, based on network congestion. Transaction fees will be burned, or withdrawn from circulation. This means that miners will not make as much as they did before the fork, as the fee they collected is now burned. It’s expected Ether’s inflation will be reduced by 4% a year and this reduction in supply will boost its.
With the explosion of NFTs, the Ethereum blockchain has suffered from scaling issues due to increased demand. The change in the way fees are calculated is a much-needed change that will benefit users.
This is a major change for miners, and how they make money. They can continue to offer their processing power to the network in the hopes of earning a reward in the newly minted ether if they are successful in winning a block. They may also receive tips from users who are interested in prioritizing their position in the block.
The London hard fork indicates the new direction Ethereum is taking.
The London Hard Fork is an important step for the network on the road to Ethereum 2.0. When Ethereum 2.0 materializes we will see the network transition away from the energy-intensive “proof-of-work”, in which miners solve difficult math equations to create new coins, towards “proof-of-stake”, in which users simply leverage their existing ether as a means to verify transactions and mint new coins. The days of miners are coming to an end, and this will have significant implications not just for Ethereum, but for the entire cryptocurrency industry.
So, will the price of Ethereum continue to rise?
My feeling is that it will.
The London upgrade is expected to boost the price of ether in the medium to long term. The deflationary measure theoretically pushes ether’s price up, because supply growth decelerates. As I write this Ethereum is hovering above $3,000. With its new deflationary effect, similar to bitcoin’s halving, I believe it will reach $5,000 to $7,000 in the near future. I am not a prophet and this is not investment advice, but the London Hard Fork and the upcoming Ethereum 2.0 upgrade can only strengthen investor sentiment for Ethereum and drive its price up.
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