With Ethereum still well off its all-time-high, investors may be looking forward to its upcoming upgrade, also known as “London” to see prices head higher.
The world’s second largest cryptocurrency by market cap and home to the bulk of applications in the cryptocurrency space, from non-fungible tokens to decentralized finance, the upcoming upgrade could trim the pace at which the supply of Ether grows.
Unlike Bitcoin, Ether does not have a deflationary emission curve, with the total number of new Ethers minted deliberately kept ambiguous, to facilitate two competing demands – to ensure usage as well as adoption.
The upcoming Ethereum upgrade, EIP-1559 (EIP stands for Ethereum Improvement Proposal) will split up the approximately 13,000 new Ethers issued every day for miner payment or “gas fees” into three parts, one of these, the minimum fee that users pay to process transactions, will now be removed from circulation in a process known as burning.
That “burning” will increase the scarcity of Ether, and has led some traders to speculate could push its price higher.
Burning essentially sends the Ether to a “dead” wallet where the private key has been destroyed and the Ether that sits inside there becomes inaccessible, hence “burned” and should taper Ether’s current supply increase of approximately 4% per year.
But that’s just the first step in Ether’s ambitious plans to grow its substantial blockchain, because come next year, Ethereum will try to shift towards a proof-of-stake mechanism to verify transactions, which would allow Ether holders to secure the Ethereum blockchain by staking Ether instead of mining it.
The London upgrade is set to take place within the next week, largely dependent on when the Ethereum blockchain reaches the point where the update is scheduled and will also benefit Ethereum users by making fees more predictable and reduce delays in processing most transactions.
Miners who had been constantly selling Ether after having mined it however, may feel somewhat short changed, especially given the initial revenue hit.
Ether is currently trading at about half of it’s all-time-high in May, despite a recent recovery in Bitcoin.