Please enter and activate your license key for Cryptocurrency Widgets PRO plugin for unrestricted and full access of all premium features.
Search
Close this search box.

What Is EIP-1559?

The London Upgrade for Dummies

What is EIP-1559? The London Upgrade For Dummies

What Is the London Hard Fork?

The London Hard Fork, aka the London Upgrade, was an upgrade to the Ethereum blockchain that included a set of five Ethereum improvement proposals (EIPs). The one that was most talked about was EIP-1559. This went into effect on August 5, 2021.

What Is EIP?

EIP stands for Ethereum Improvement Proposal. It’s how programmers update the Ethereum blockchain. There are five steps the proposal must go through before being implemented, from at first proposing the draft to be considered to finally the Ethereum Core developers implementing the proposal. If you want the technical version, read this.

What Is EIP-1559?

This Ethereum Improvement Proposal implemented two major changes:

1) Before this upgrade, users had to bid on how much they were willing to pay to have their Ethereum transaction picked up by a miner, which can be extremely costly. Under EIP-1559, this process is handled by an automated bidding system with a set fee amount that fluctuates based on how congested the network is.

2) A part of every transaction fee is burned, or removed from circulation, which will begin to reduce the supply of ether and potentially boost its price.

What Is Ethereum?

Ethereum is a decentralized, open-source blockchain that was the first to support smart contracts. Invented by Vitalik Buterin, it went live on July 30, 2015. Its multiple-layer architecture allows for ecosystems of cryptocurrency tokens and non-fungible tokens (NFTs) to be built on top of the Ethereum blockchain. This has also allowed for the creation of numerous Decentralized Finance (DeFi) applications.

Its native cryptocurrency token is Ether. All other tokens built on the Ethereum blockchain pay the network transactions fees with Ether.

Ethereum is the most actively used blockchain as of July 2021, with more transactions than Bitcoin.

You can read an in-depth explainer on Ethereum here.

What Is Ether?

Ether is the second largest cryptocurrency by market capitalization and the native cryptocurrency token of the Ethereum blockchain. All other tokens built on the Ethereum blockchain pay the network transactions fees with Ether.

As of August 10, 2021 the price of one Ether is just over $3,100. The ticker symbol of Ether is ETH.

What Are Gas Fees?

Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain. A similar mechanism also exists on other blockchains as well.

Does EIP-1559 Lower Gas Fees?

In short, no. However since the gas fees are now automatically regulated during times of increased network stress, it created a more efficient system that should prevent dramatic spikes in gas prices.

Is This Ethereum 2.0?

No. Ethereum 2.0 is a series of much larger changes. One of these changes is moving from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) method of mining. PoW is the method used by Bitcoin and PoS uses considerably less energy.

However, the London Hard Fork is widely considered a major upgrade on the road map to Ethereum 2.0.

Does EIP-1559 Make Ethereum Deflationary?

No, because the supply continues to increase. This more accurately could be called dis-inflationary because since part of the gas fees are now burned, new ETH is being added at a slower pace than before.

In the first two days after EIP-1559 was implemented, 5,000 Ether (ETH) was burned, approximately $14 million. This was about 36% of the total amount of new ETH that was mined in the same time period per this report from CoinDesk.

Where Can I Learn More About Ethereum?

You can read my Ethereum explainer here.

CoinDesk created a much more in-depth guide called Ethereum 101.

A great resource is ethereum.org.

To track the Ethereum blockchain and many of the tokens built on top of Ethereum, you can visit etherscan.io.

Where Can I Buy Ether?

Some of the easiest ways for a beginner is to get an account with Coinbase, Gemini or PayPal.

Generally the steps are simple:

  • Sign up
  • Provide your contact information and government ID
  • Link your bank account
  • Deposit funds
  • Buy Ether (ETH)

If you enjoy reading stories like these and want to support me as a writer, consider signing up to become a Medium member. It’s $5 a month, giving you unlimited access to stories on Medium. If you sign up using my link, I’ll earn a small commission.

If you enjoy reading stories like these and want to support me as a writer, consider Subscribing.


This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.

Author

Alexandre Lores is a personal finance writer from Tampa Bay, Florida, with the goal to help one million people achieve financial freedom. He has spent over five years studying markets and economics, finding Bitcoin in 2017 and never turning back. He frequently appears on TV and in online news articles and is a regular Twitter spaces host.

Share this article
Facebook
Twitter
LinkedIn
WhatsApp
Email
More Articles
What is EIP-1559? The London Upgrade For Dummies
Crypto

What Is EIP-1559?

What Is the London Hard Fork? The London Hard Fork, aka the London Upgrade, was an upgrade to the Ethereum blockchain that included a set

Reach for the Sky by Laura Alonso. Owned by curating_bits.
NFTs

NFT Artist Spotlight: Laura Alonso

Reach for the Sky by Laura Alonso. Owned by curating_bits. Link “Right now we associate NFTs with art but in 10 years I think NFTs

Leave a Reply

Your email address will not be published. Required fields are marked *

The Latest Block Newsletter

Subscribe Now

Sign up for our exclusive email list and be the first to hear of
our weekly summarization of Crypto and Fintech News