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Ethereum is just days away from undergoing one of the most significant system upgrades since its inception. The London hard fork, which is the implementation of EIP-1559, is expected to completely alter Ether’s monetary and economic model and network.
These changes are expected to take effect following the start of the hard fork on August 4th. However, there have been other changes for the altcoin, each of which has occurred over time.
The issue of transaction fees
One of the most discussed changes expected out of EIP-1559 is that ETH’s transaction fees will become relatively stable. Any entity wanting to conduct a transaction on the Ethereum network is required to pay a “gas fee.” The same is to be paid in Ether, to miners, to process these transactions. During the 2020-2021 bull run, these fees skyrocketed.
In fact, according to the attached chart, the transaction fee was as high as $71 at one point. However, that aspect might end up being tackled before the hard fork itself.
Over the past few weeks, the gas fees for ETH transactions have drastically dropped on the charts. Now, many have suggested that this was due to the bearish market.
However, a counter-argument is that DeFi applications continue to proliferate. UNI and AAVE have had strong on-chain performances in recent weeks, and major functionality within these assets is dependent on the utility of Ether. The Ethereum network’s fees were already lower than the yearly average in both June and July. With such a healthy fee market, Ethereum can afford a larger security budget.
Investment and trading are not the only ways to profit from Ethereum anymore
The fact that Ethereum experienced massive exchange outflows was a popular bullish argument in 2020-2021. The implication was that hodlers were removing assets from centralised platforms and simply holding their allocation. It may have been true in late 2019 and early 2020, but the playing field has shifted.
Data show that exchange outflows have increased, but the key point is that more and more Ethereum is flowing into smart contracts. Furthermore, ETH users are looking for other ways to earn interest and yields.
The rise of yield farming and interest lending platforms has provided ETH users with new opportunities. The reason being that they are able to earn capital without depending too much on a bullish or bearish cycle.
Changes are coming but, “change” is already here
The industry is evolving at breakneck speed, and Ethereum is on the verge of a massive upgrade. However, users should not expect revolutionary changes. Those who are may, in fact, be ‘wrong’ to some extent.
Ethereum has already been incorporating changes that may define its functionality and usage in the future over the last few weeks.