The ethereum upgrade that will destroy coins is happening August 5. Here are 4 things you need to know
Comment of the Day

August 04 2021

Commentary by Eoin Treacy

The ethereum upgrade that will destroy coins is happening August 5. Here are 4 things you need to know

This article from Markets Insider may be of interest. Here is a section:

EIP-1559 has excited people because it will destroy or "burn" ether - the cryptocurrency of the network.

Miners do not receive the base fee; otherwise, they could artificially congest the network to keep the fee high. It's destroyed instead.

Some investors believe the fact that the supply of ether will be limited by burning could cause explosive price growth.

But the influence on price is far from certain, developers say. It also depends on things like transaction volumes, which determine how big gas fees are and so how much ether is destroyed.

"Until it's deployed, we don't know exactly what the effect will be in terms of ether burned," Ben Edgington, an ethereum developer at ConsenSys, said.

Eoin Treacy's view

Reducing supply is beneficial for the price provided there is sufficient demand. The actions being taken to reduce uncertainty about transaction fees are a small step towards building confidence in the network.

The move to proof of stake (in 2022?) has the investment community abuzz because it will provide dividends for holding an investment. So, there are portions of the network that will increase supply and portions that will decrease supply. Even if the overall effect is mildly deflationary that suggests there will be a transfer of wealth from traders to holders. The question then arises about whether this will affect liquidity in the market.

At present traders are willing to give the benefit of the doubt to the upside. Ethereum has rallied over the last week to break its sequence of lower rally highs, to establish a range above $2500. A sustained move below the trend mean would be required to question potential for additional upside at this stage. We'll find out over the coming couple of days whether this was a buy the rumour, to sell the news event.

Bitcoin continues to range around $40,000. So far, this has been an orderly pause and as long as it is limited to its current size, the benefit of the doubt can be given so some additional strength.

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