Ethereum: a few steps to go to EIP-1559
Total Ethereum mining revenue reached $1.37 billion in February setting a new record. In the meantime, an average transaction fee on Ethereum blockchain network has got close to $40. For a while, Ethereum’s top mining pools remained divided on whether to reduce miner transaction revenue through the Ethereum Improvement Proposal (EIP)-1559.
As we know, the developers were working on the latest Ethereum upgrade for a while. Finally, they have announced that the long-anticipated Berlin hard fork is ready to roll out. The mainnet is scheduled to go live on April, 14, while the testnet called Ropsten was launched on March, 10.
The innovation is ultimately intended to make the Ethereum network cheaper and faster by restructuring the transaction fees. To lower the price, the existing bidding-based fee market will be replaced with an algorithmically determined fixed fee and a burn mechanism (“ETH buyback”) will be introduced which will also affect the miners’ revenue.
A part of Ether miners was planning a protest against the upcoming implementation of EIP-1559. They intend to direct their hash rate to the 1559-opposed pool, Ethermine, for 51 hours on April 1. Most likely, they hope for putting to use more than 51% of hash rate.
But their protest has failed. By the end of the day the pool hash rate grew very slightly. If at the beginning of the week the miners on the Ethermine pool generated a hash rate of 94 TH/s, then on April 1, the hash rate was 96 TH/s.
Apart from limiting fees, the burn mechanism could lead to lowering the Ether supply. Ethereum co-founder and EIP-1559 co-author, Vitalik Buterin, agrees that the proposal may result in creating a bullish sentiment for Ethereum as more Ether will be destroyed than created.
Another anticipated Ethereum’s update is moving from proof-of-work to a less energy-intensive proof-of-stake. With a POS consensus algorithm, validators can earn ETH rewards in exchange for providing security to the network by locking up their holdings. Once fully merged, it will replace the current proof-of-work mechanism.
Ethereum’s core developers have scheduled EIP-1559 implementation for July. At that point, Ethereum miners will effectively become obsolete.