Why is Ethereum transaction fees so expensive?In the past, it was very expensive to send Ethereum. This created a huge problem and a lot of users simply did not want to send Ethereum. Something had to be done.
The reason users pay transaction fees is to pay miners to keep their Ether tokens safe. These transaction fees are called gas fees. You may have noticed some wallets or DEXs give traders the option of paying higher transaction fees so that the network can perform a specific transaction faster.
Transactions are grouped together and send to a block. Bitcoin, for example has a 1- megabyte block size limit and can perform up to 2 500 transactions every 10 minutes. Ethereum works a bit differently. It doesn’t use megabytes but rather 15 million gas units in terms of target rate for each block.
The reason why it was so expensive to send Ethereum was due to an increase in transactions on the network that required more work from the miners. For example, if there was a new NFT or a new crypto influencer created a token or if Ethereum had an upgrade, there would be more people buying and selling. More transactions mean more gas to pay the miners.
What is the Ethereum London hard fork?The Ethereum London hard fork consists of five Ethereum Improvement Proposals (EIP). Each protocol puts forth a set of changes to the code. The important one now is the EIP-1559. It changes the whole dynamic!
With EIP-1559, users do not have to compete and pay more to have transactions performed faster on the Ethereum network. Fees will become more predictable since Ether tokens will be burnt.
EIP-3554 is another important protocol that paves the way for Ethereum 2.0. This upgrade, that is scheduled to occur early in 2022, is a total overhaul of the system. Ethereum 2.0 will switch the network from Proof-of-Work (PoW) mining system to Proof-of-Stake (PoS). This upgrade will be huge for Ethereum as it will make the token the greenest currency on the planet.
How will these upgrades affect the ETH price?With the London hard fork, the price of Ethereum went up by more than 25% to over $3 155. Thus far, almost 22 000 ETH has been burned. With Ethereum moving from a PoW to PoS in 2022, further reduction in the rate of supply creation will occur. Basically, more coins will be burned than created which will make Ethereum more valuable.
In conclusion, Ether hodlers believe that by burning tokens, the supply of Ether will be limited and could result in price growth. Whether you agree or not, it is vital to have ETH in your crypto investment portfolio. Open an account on AltCoinTrader today and buy ETH on South Africa’s favourite cryptocurrency exchange.