Around 20:00 on August 5th, Beijing time, the Ethereum London hard fork upgrade will be ushered in, 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 the official launch of Ethereum 2.0.
We say it is the most important because this EIP will completely change the rate mechanism of Ethereum, which is very likely to change the total circulation of Ethereum from the current unlimited limit to constant or even deflation.
In the current Ethereum mechanism, when a user makes a transaction on Ethereum, the transaction fee we give will be fully paid to the Ethereum miners. And when EIP1559 is officially launched, the fee structure we pay will change to basic fee + tip.
Among them, the basic fee is what all traders have to pay during this time period, and it is the same for all traders. The base fee will be adjusted at any time according to the congestion situation of Ethereum. When the usage rate of Ethereum > 50%, the base fee will increase; when the usage rate of EthereumWhen <50%, the base cost will be reduced. This means trying to keep Ethereum usage half full through adjustments to base fees.
The tip among them is at the discretion of each trader. If a trader thinks his transaction is very important and hopes that his transaction can be packaged by miners as soon as possible, he can tip as much as possible to attract miners to package the transaction as soon as possible. Base fees are burned by the system, and tips are given to Ethereum miners.
From the perspective of the fee rate structure, before EIP1559, miners took 100% of the handling fee, but after EIP1559, miners only took part of the handling fee. At the beginning of the year), some big miners clearly expressed their opposition, 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 it seems that the voice of opposition has no longer been obvious recently.
In fact, since part of each transaction fee will be burned, this is a consistent benefit for all Ethereum holders, including miners. With the burning of Ethereum, not only can the circulation of Ethereum be maintained in a stable state, but it will even turn Ethereum into deflation. This will have a profound impact on the long-term price of Ethereum.
Overseas groups have made a detailed chart to explain the relationship between the basic fee and circulation of Ethereum after EIP1559 goes online. We can take a look at this chart:
In the above figure, we can see that after EIP1559 goes online, when the basic fee of Ethereum reaches 15Gwei, the total circulation of Ethereum will maintain a constant total of 120 million pieces on January 31 next year. If the basic fee exceeds 15Gwei, the total circulation of Ethereum will start to decline after January 31 next year, that is, it will enter the deflation mode.
Therefore, the basic fee of 15Gwei is a critical threshold. What is the concept of 15Gwei? As of writing, before EIP1559 goes online, the average transaction fee that users have to pay to miners for a transaction on Ethereum is 37Gwei. So 15Gwei is a relatively low threshold. That is to say, after EIP1559 goes online, there is a high probability that Ethereum will become deflation next year. In the future, it is even very likely that the total circulation of Ethereum will remain stable during the bear market.
This means that as long as the ecology of Ethereum continues to grow, ETH will continue to accumulate value. Therefore, as long as the price bubble of ETH is not too large, any selling behavior is inappropriate in terms of value judgment. This will further lead to the reluctance to sell ETH, so that the price of ETH will have a more solid support base.
