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London Hard Fork On The Horizon, Will Ethereum Become Deflationary?


    London Hard Fork upgrade is less than 24 hours from now and the crypto space is preparing for the much-awaited upgrade

    While a ‘panic type situation exists among the miners, the investors are rejoicing as the current circulating supply could become more valuable

    A positive impact on the Ethereum price is expected as a surge towards $3000 could be on the cards

For quite a while ‘London Hard Fork’ or EIP 1559 is the talk of the town as a solution for high gas fees is addressed. While the miners are could undergo a large impact, the investors see it as a golden opportunity. As the majority of the ETH issuance would be burnt, yet Ethereum still cannot become a deflationary asset all of a sudden.

A total of 5 EIPs are scheduled to go live with the London Hard Fork,

  • EIP 1559: Change in fee structure for ETH 1.0
  • EIP 3198: Opcode for Base Fee
  • EIP 3529: Reduce the refunds
  • EIP 3541: The contracts with 0xEF byte to be rejected
  • EIP 3554: Increase Difficulty in Bomb Delay to December 01, 2021

However, among all of these, the EIP 1559 has gathered much attention as it’s all set to change the fee structure completely. Currently, the miners were enjoying huge profits with 2 ETH plus the transaction fees for each block confirmation. Moreover, with the congestion on the ETH network, the Gwei also shot up in seconds. 

But with the upgrade, the block size will increase with the increase in the network traffic. And hence the gas fees are not lowered in long run but yes users remained exempted from overpaying for transactions. With the better estimation process, high gas fees are looked at and also the gas fees between blocks are also smoothened. 

Also Read: How Ethereum Price Will React To The EIP 1559, London Hard Fork?

When Will Ethereum Become A Deflationary Asset?

Firstly to become a deflationary asset the volume burnt must be higher than the ETH volume issued in block rewards. With the current proof-of-model, nearly 4% of the total Ethereum supply is issued. And to balance the issuance rate by ETH burn after EIP 1559, a consistent 150 Gwei is required. No doubt these levels were attained but could not sustain. 

However, with the Proof-of-Stake upgrade, the ETH issuance will drop remarkably by 90% to approximately 0.4%. And to undergo such a drastic slash, Bitcoin would require three halvings, hence ‘triple halving’. In the coming days, under the upgraded model, 20 Gwei is to be sustained to balance the issuance. Hence, this is when Ethereum will truly become a deflationary asset. 

Overall, the London Hard Fork intends to set base gas fees and with the congestion in the netwrok, the block size is increase and also the base fees are. And hence prevent the traders from overpaying for a transaction. Therefore, despite ETH does not become deflationary by default and supply is not reduced by 90%, yet it is still very bullish for Ethereum price

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Disclaimer : The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of Coinpedia. Every investment and trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

Sahana Vibhute

A passionate cryptocurrency and blockchain author qualified to cover every event in the crypto space. Researching minute occurrences and bringing new insights lie within the prime focus of my task.

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