A little bit of cold water was poured when EIP-1559 went online

‍On August 5th, the Ethereum London hard fork upgrade was completed, and EIP-1559 was officially launched.

Ethereum, ushered in an unprecedented moment of highlight, it seems that everyone is discussing and waiting for the moment of reversal- Ethereum surpasses Bitcoin.

Goldman Sachs issued a report saying that Ethereum is the most “potential for practical use” of the blockchain, and its market value is expected to surpass Bitcoin.

BitMEX founder Arthur Hayes wrote an article to discuss the possibility of Ethereum’s market value surpassing Bitcoin.

The two principals of Bankless, Ryan Sean Adams and David Hoffman, are the number one milk kings of Ethereum, and they output such things as “Ethereum is the most capital efficient asset”, “It is inevitable that Ethereum surpasses Bitcoin”… etc. content.

It is worth mentioning that because the Chinese encryption world often translates and disseminates Bankless articles, the Chinese-speaking world is also filled with confidence in the mystery of Ethereum’s reversal of Bitcoin.

The atmosphere group is all in place. Ethereum founder V God also bravely stated in an interview with CNN that Ethereum is expected to surpass Bitcoin in market value.

What does Ethereum rely on to surpass Bitcoin?

EIP-1559 is undoubtedly where everyone’s hope lies. In all the discussions about Ethereum surpassing Bitcoin, EIP-1559 will be mentioned: After the implementation of EIP-1559, the basic handling fee will be burned, and Ethereum will reverse the trend of inflation and become deflation. Assets, as for price, of course To the Moon.

For example, Dan Morehead, founder of Pantera Capital, said in an interview that the upcoming London upgrade will help Ethereum catch up with Bitcoin and make Ethereum more like a fixed asset.

The anticipation of deflation on Ethereum has also evolved into a MEME symbol. The crypto big Vs put expressions of bats and voices next to their Twitter names.

But the more I tout Ethereum in this way, the more dangerous I feel.

EIP-1559, cheering for tax payment

People always tend to overestimate the short-term impact of an event, but greatly underestimate its long-term impact. EIP 1559 is a very appropriate description.

This impact may be positive or negative, although most people regard it as a great benefit.

First, we have to understand a real EIP-1559.

The core of EIP-1559 is to change the payment model of users’ transactions on the Ethereum chain.

In the past, transactions on the Ethereum chain used the first-price auction model, which is easy to understand, and the higher the price.

According to the user’s bid, the miner selects the packaged block and obtains the commission paid by the user. This also leads to a serious problem- internal volume.

Just like driving a car and ordering food delivery on a rainy day, the driver takes orders purely according to the bid price. This results in that only the “rich” can enjoy the service first, and others have to raise the price, which invisibly increases the average cost.

Originally 20 yuan can be used to make a taxi, but in the end everyone has to pay 50 yuan to get a taxi, which is too much.

How to solve it?

This leads to EIP-1559, abandoning the first price auction, adopting the uniform price auction model, and setting a basic fee.

This is like in order to deal with the problem of expensive and difficult taxis, the Internet company personally sets up a price alliance. Drivers no longer choose passengers based on the price, but directly use the price set by the Internet company. This fee will be based on real-time supply and demand. change.

In addition, in order to cater for the needs of some users, and to speed up transactions when congested, the miners can also be tipped by means of rewards.

So, the miners will not send a large number of transactions to raise the basic fee, and the left-handed is the right-handed?

Therefore, in order to eliminate this, EIP-1559’s most ruthless trick appeared. The miners did not receive the basic fee and directly destroyed it . This is also the most controversial point of the entire EIP-1559.

If it is not destroyed, it will be like a taxi or takeaway platform under the Internet ecology uniformly setting dynamic prices and tipping during peak periods. Once the destruction policy is introduced, it will change the currency policy of ETH.

Initially, the purpose of EIP-1559 was to reduce the handling fee, but now everyone is more concerned about whether EIP-1559 will allow Ethereum to enter deflation and whether the price is TO THE MOON.

In the Bitcoin mechanism, the system only provides a payment channel, and the user directly pays the miner who provides the accounting service, which is equivalent to a service fee.

After EIP-1559, the fees originally paid directly to the miners were deprived of and destroyed by the “central”, which was equivalent to becoming a tax.

Taxes are never only levied on producers, but also on consumers. Can increasing taxes and reducing the income of service parties reduce transaction costs? To use an analogy, collecting heavy taxes from real estate developers, and reducing the income of real estate developers can reduce housing prices?

It seems that it doesn’t make sense from the basic economic principles, so there is a big question mark here. At least from the operation so far, there is no performance in reducing the handling fee.

So why do most currency holders applaud such a “tax policy”?

Without him, it is good for the price of ETH.

In the eyes of most people, all measures that are conducive to the rise of currency prices should be supported. This tax is distributed to all coin holders in the form of destruction, which is a feat for miners to divide gasoline.

If the Internet platform takes away most of the driver’s basic expenses, it will definitely be criticized as “capital sucking” and sympathize with the miners, but if this fee benefits all stockholders, then everyone will feel that this policy is justified. should.

As for the miners, in front of the strong voice of V God and the Ethereum Foundation, it seems that they can only swallow their voices.

Compared with Bitcoin miners, Ethereum miners have always been relatively weak.

From the perspective of algorithmic mechanism, miners should be the owners of the blockchain, at least as partners, but since the difficulty bomb was set in 2015, Ethereum miners are destined to be temporary workers, and they have not received the “respect” they deserve.

When ETH2.0 arrived, it was destined to split, and EIP-1559 previewed the contradiction. Now it seems that V God and the Ethereum Foundation have won on the surface, but the consensus is broken, and the counterattack of the miners may be on the way.

A big fork will come sooner or later.

Be alert to the prosperity crisis

In our previous article “The Real Competitive Advantage of Ethereum: Ideology”, we pointed out that the biggest competitiveness of Ethereum is the ideology of decentralization.

DeFi is also an ideological choice. For example, some purists or head DeFi protocols refuse to develop any applications on the network outside of Ethereum. This persistence greatly broadens the moat of the Ethereum network.

All new public chains trying to challenge Ethereum must realize that technological progress is actually the easiest, and ideological transcendence is the most difficult.

Correspondingly, the biggest danger of Ethereum is the degeneration of ideology, from a creative and united community to a company controlled by Vitalik and the Ethereum Foundation.

EIP-1559

Layer2

ETH2.0

This is the “three small things” that V God and the Ethereum Foundation have been committed to promoting. At present, it seems that no one can stop the pace. All non-technical issues are not a problem.

Miners can be sacrificed and abandoned at any time. This is the price on the way to growth. Who is the next price?

Starting from EIP-1559, the power structure of the Ethereum system has changed. The single power subject is constantly expanding, printing money with the left hand and taxation with the right hand, similar to a national system.

In 2019, Lane Rettig of the EWASM team, the core developer of Ethereum, complained on Twitter: “The governance of Ethereum has failed. In fact, it is the rule of experts: a small group of technical experts have the final decision on protocol updates.”

Compared with the Bitcoin network that also uses off-chain governance, the “Satoshi Nakamoto” of Ethereum has not retired. Although V God himself is not a dictator, his words and deeds can often affect the minds and decisions of other people, especially It is because the Ethereum Foundation has no opinion and is afraid to express opinions and make decisions.

But the magic is that it was precisely in the year or two when the Ethereum Foundation had no sense of existence (such as 2019, 2020) that the entire Ethereum DeFi ecosystem achieved a big explosion.

Throughout history, many great prosperity stemmed from bottom-up barbaric growth, inaction and selfishness, and many tragic tragedies often come from the noble and grand dreams and wishful thinking of certain individuals and organizations.

Although the media and the community are chanting “Ethereum is invincible” and “Ethereum is about to surpass Ethereum”, today’s Ethereum is far from “victory”. There are many problems and a long way to go.

Be wary of potential crises and be wary of killing.

I wish Ethereum get better and better.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-little-bit-of-cold-water-was-poured-when-eip-1559-went-online/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Leave a Reply