{"id":170310,"date":"2021-02-04T05:12:52","date_gmt":"2021-02-04T02:12:52","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/gas-fee-proposal-could-create-positive-feedback-loop-for-eth-price-grayscale\/"},"modified":"2021-02-04T05:12:52","modified_gmt":"2021-02-04T02:12:52","slug":"gas-fee-proposal-could-create-positive-feedback-loop-for-eth-price-grayscale","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/gas-fee-proposal-could-create-positive-feedback-loop-for-eth-price-grayscale\/","title":{"rendered":"# Gas fee proposal could create \u2018positive feedback loop\u2019 for ETH price: Grayscale"},"content":{"rendered":"

“# Gas fee proposal could create \u2018positive feedback loop\u2019 for ETH price: Grayscale <\/strong>”
\n<\/p>\n

Institutional crypto fund manager Grayscale Investments believes the introduction of the proposed EIP-1559 fee and burn mechanism could create \u201ca positive feedback loop for Ether\u2019s price\u201d should network activity continue to increase on Ethereum.<\/p>\n

That\u2019s because the proposal could result in Ether being burned at a rate exceeding the creation of new supply, significantly shifting the supply-demand dynamic underpinning the ETH markets.<\/p>\n

In Grayscale\u2019s Feb. 4 report<\/a>, Valuing Ethereum<\/em>, the firm discussed the role Ether plays as a \u201cconsumable commodity\u201d within the Ethereum ecosystem and considers the impact EIP-1559 could have on the network\u2019s economics.<\/p>\n

EIP-1559 was proposed<\/a> by Ethereum co-creator Vitalik Buterin and Ethhub co-founder Eric Conner in April 2019 and seeks to implement a fee market and burn mechanism to bring Ethereum\u2019s often-skyrocketing gas fees under control. In December, Buterin again urged Ethereum to adopt EIP-1559.<\/p>\n

The proposal advocates introducing a \u201cbase fee\u201d that will be burned to execute transactions alongside a tip that miners will receive. The base fee will then increase or reduce based on whether the network is above or below 50% capacity, allowing wallets to better predict fluctuations in gas prices, and establishing Ether as the network\u2019s sole native economic unit.<\/p>\n

Within the context of the Ethereum\u2019s economic ecosystem, Grayscale argues EIP-1559 would \u201ctransform Ether from a medium of exchange asset to a consumable commodity,\u201d making it more akin to \u201ccombustible gas than money.\u201d <\/p>\n

Should the burning of Ether to pay for transactions outpace the creation of new Ether supply, Grayscale speculates that EIP-1559 could be extremely bullish for the ETH price:<\/p>\n

\u201cIf activity increases and the supply of Ether decreases due to burning, a supply and demand curve would indicate an increase in the unit price of Ether because each unit would need to satisfy a greater proportion of economic activity. If EIP-1559 is implemented, it would institute a consumption mechanism that should serve as a positive feedback loop for Ether\u2019s price.\u201d<\/p><\/blockquote>\n

In October, Cointelegraph reported that one million Ether would have been burned over the preceding 12 months if EIP-1559 had been implemented at the time.<\/p>\n

While EIP-1559 has received the support of most Ethereum developers, the mining community has unsurprisingly rallied against the proposal to burn the lion\u2019s share of the fees they currently collect. Last month, eight mining pools representing 30% of Ethereum\u2019s hash rate joined a consortium of pools opposing<\/a> EIP-1559.<\/p>\n