By Abhinav Kaul
If you are a cryptocurrency investor, you would recently have received a message from your trading platform that it has disabled deposits and withdrawals for Ethereum (ETH). These facilities were restored by the exchanges late on Friday. The reason was that a major technical upgrade,called ‘The London Upgrade’ or ‘EIP -1559’, was being deployed on the Ethereum network.
Experts say the upgrade is likely to give a boost to ETH prices.
“The entire crypto industry is quite excited about the latest Ethereum network upgrade. It will have a positive impact on investors as it is expected to bring in a lot of transparency in terms of transaction fees on the network,” said Shivam Thakral, chief executive officer, BuyUcoin.
We tell you what this upgrade is and why it matters to investors.
The London upgrade and its need: It refers to a set of interconnected upgrades that will make Ethereum more scalable, more secure and more sustainable.
“The Ethereum upgrade is popularly known as ‘London Hard Fork’. The major change we are going to see in this is about how the transaction fee collected by the computers for processing the transaction is handled and distributed. This upgrade will mandate a part of the fee to be destroyed,” said Sathvik Vishwanath, co-founder and chief executive officer, Unocoin.
In other words, only part of the actual fee charged to process a transaction would reach the person who is providing his processing power.
“Such destruction of cryptocurrency is possible by sending them to a null address and such payments can never be reversed or recovered or moved to another account. This is interesting because over time, this would reduce the ether in circulation, which could push its price higher,” he added.
Impact on investors: According to experts, the upgrade is expected to boost the price of ether in the medium to long term, which will strengthen investor sentiment around the world’s second biggest cryptocurrency.
“It will be exciting to see the bitcoin vs ether phase after the upgrade, as there are already some flipping conversations going on between ether and bitcoin in terms of market capitalization. There is a huge gap in the value between the two, but ether is the only strong competitor of bitcoin in the crypto world. However, it is important to note that Ethereum is already ahead of bitcoin on various other factors,” said Thakral.
While bitcoin’s most well-known use case is a store of value, Ethereum has several real-world applications such as decentralized finance (DeFi) and smart contracts.
Polygon is the first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development. It tries to solve pain points associated with blockchains such as high Gas fees (the fee required to conduct a transaction on Ethereum) and slow speeds, without sacrificing on security.
EIP-1559’s importance for Polygon: EIP-1559 is important for the Ethereum network as it reduces the peak Gas price, which is also helpful for Polygon and any other layer-2 solution provider.
Polygon is also in advanced stages of implementing EIP-1559, as it wants to keep the startup as close to the Ethereum network as possible.
“It will be overall helpful for the Polygon ecosystem as due to a lot of adoption, we are also seeing Gas fees also going up,” said Sandeep Nailwal, co-founder, Polygon.