It’s been another crazy week for the cryptocurrency market as Bitcoin and Ethereum steadily climbed and are now hovering very close to their 2021 all-time highs.
In previous market round ups, we covered the challenges of Ethereum scaling, high gas fees, and even smart contract competitors trying to grab market share, transactions, and users from Ethereum because of its transaction delays and high-gas fees.
While many of these platforms, such as crypto-investors using Binance Smart Chain’s Pancake Swap over the decentralized exchange Uniswap and Polkadot’s rise in adoption, have taken off - Ethereum has recently announced some major updates are coming very soon. Ethereum has the opportunity to drastically improve the world’s most powerful distributed computer and overcome its recent shortcomings.
Ethereum’s recent proposed upgrade, Ethereum Improvement Proposal (EIP-1559), set to launch in July, brings about some exciting changes to the smart-contract platform.
One of Ethereum’s most common criticisms is that it fails to have the same scarcity-driver as Bitcoin, which has a limited fixed supply. The improvement proposal works to counteract this by introducing a burn function into the protocol. The Ethereum blockchain itself would use a standard base-portion of transaction fees used on the network to buy ETH on the open market and burn it to reduce its circulating supply. The more ETH transactions happening on the network, the more the circulating supply would be reduced, with an estimated 1% to 4% of circulating supply burnt annually (DeCrypt).
The proposal also addresses a significant issue with the Ethereum network right now: miners bid gas fees (which are what power transactions) to the highest bidder, but a recent surge in demand has raised gas prices. EIP-1559 would set a fixed gas fee for miners, which would level-set the cost of transactions across the market, standardize rewards for miners, and reduce the volatility of the fees themselves (CoinMarketCap).
While this would create consistent rewards for ETH miners, it has the potential to significantly cut into their profit model for powering the network by nearly 50% (CoinTelegraph). Many miners have demonstrated their opposition to this model. They will be staging a digital protest of sorts on April 1st by sending their hashpower to an opposition pool, with the hope of vetoing this improvement proposal.
It’s important to note that while this contention could cause a fork in Ethereum, stop the proposal from moving forward, or simply be miners casting their votes against it, the improvement proposal can still be ushered along. It’s a demonstration of the distributed power and governance of Ethereum and that the network itself has the power to vote and the ability to help inform its future.
This Ethereum proposal also has other scalability features built into it, which could multiply the transaction capacity of Ethereum 10x, while reducing fees. If approved, the proposal could further cement Ethereum's status as the number one smart contract platform, causing DeFi platforms to soar, increase the adoption rate even more, and potentially even drive up prices with greater scarcity.
One of the biggest news stories this week was about the digital artist Beeple, who had one of his original digital NFTs sell at the Auction House Christie’s for a staggering $69 Million dollars from an unknown buyer (CoinDesk). The NFT itself lives on the Ethereum blockchain, where it will be transacted.
It’s fair to say that with Ethereum’s proposed upgrades, Layer-2 scaling solutions now fully deployed, and NFTs going mainstream, this blockchain-unicorn has everyone’s attention.
Top Market Movers
- Hedera Hashgraph (HBAR) +83%
- Enjin Coin (ENJ) +65%
- Terra (LUNA) +64%
- Nervos Network (CKB) +50%
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