Ethereum London Upgrade with EIP 1559 Activates, About 300 ETH Burned in Just an Hour

The much anticipated London hard fork with EIP 1559 has been activated at block 12,965,000.

As of writing, 304.9 ETH has already been burned.

While the burning started fast, it may not continue at this rate as all the miners haven’t started mining 30 million blocks yet, so we are not at maximum capacity. Additionally, “once the mempool has been cleared entirely… blocks will become smaller, and basefee will fall again,” noted researcher Hasu.

Miners can now mine blocks up to 30m gas. As long as they are >15m, basefee will keep rising. https://t.co/QIywv7AEw3

— Hasu (@hasufl) August 5, 2021

All the transactions will now be handled according to the new format, which means miners have to burn ETH to include the transactions in a block.

In case wallets aren’t ready for EIP 1559, while the format of the old transactions will stay compatible, the gas price will be converted to the new format — max basefee + tip user is willing to pay. So, as a user, you have to be careful not to overpay.

In response to the hard fork upgrade, Binance announced a temporary pause, for about two hours, on deposits and withdrawals of Ether if the hard fork might result in an additional token to reduce the trading risks brought about by price volatility.

It's a pretty magical moment to see such a major upgrade go through smoothly on a $300b settlement layer in a decentralized manner.

— Arthur (@Arthur_0x) August 5, 2021

Just as the activation happened, the price of ETH took a drop to $2,513 only to recover fast and above $2,600.

The excitement around the upgrade intensified in the last few days that Ether printed 13 daily green candles in a row. The subsequent red candle only ended up pushing the crypto asset to near $2,800 on Wednesday.

As of writing, ETH/USD aims to go even higher while being down about 40% from its mid-May peak.

The fact u can watch the burn, is the definition of a perpetual FOMO machine.

— CM (@ConvexMonster) August 5, 2021

ETH/BTC meanwhile has found resistance at 0.069. Once past this, it can rally between 0.073 and 0.077. ETHBTC peaked out at 0.082 on May 15.

According to an Ether enthusiast who goes by CroissantEth on Twitter, just as EIP 1559 goes into effect, it will have an “instant shock to ETH” that could potentially burn “already existing tokens on the network.”

EIP 1559’s shock to Ether supply combined with the ETH locked in ETH 2.0, the record 23% of ETH supply locked in smart contracts, and the declining supply on cryptocurrency exchanges has CroissantEth very bullish on the second-largest cryptocurrency.

I have seen a countless number of people underestimating the effects of EIP-1559 and it’s changes to the network

However, I am here to argue that it has the ability to fundamentally transform the view of $ETH as an asset class

Let’s take a deeper look… 🥐

— croissant (@CroissantEth) August 5, 2021

Meanwhile, based on the past price performance of Ether around the network upgrades, crypto economist Ben Lilly expects an average return of 5.1% in the 30 days following the upgrade and then 28.8% in 60 days and 64.4% in 90 days.

Such returns could potentially see Ether’s price back at its all-time high above $4,000.