It is no secret that Ethereum gas fees have been going through the roof lately, making it very difficult for smaller ETH hodlers to capitalize on Defi yield farming. Record gas fees have crippled the network, in some cases leading to people missing out on buying into IDO's while still paying $100s of dollars in gas fees.
Why is this happening?
The current ETH mining structure uses a bidding system that allows miners to prioritize the highest bids. This causes lower transaction fee orders to get 'stuck on the books' for days or weeks, making the network unappealing to lower capital investors.
Enter the EIP1559 Proposal
The EIP1559 proposal has now been approved and is scheduled to be implemented in July 2021. This update to the Ethereum network will lower gas fees by adjusting them so users only pay the lowest bid for each block. The EIP1559 update also has the potential to shift ETH from an inflationary asset to a deflationary one by burning a small percentage of each network transaction fee.
Additionally, the base network fee will now be “burned” on each transaction, potentially leading to deflationary tokeneconomics for ETH. An analysis of network transactions last year found that EIP-1559 would have burned 1 million Ether over the course of 365 days — almost 1% of the network.
Source: cointelegraph
This is great news for everyone... apart from perhaps the miners, who are already complaining about how this will effect their revenue and making noises about a possible hard fork.
I personally think that this is a selfish, short term attitude that disregards the stagnating effect on price that ETH's inflationary model is causing. I know that ETH price has risen considerable in USD value since late last year, but when we consider ETH's utility, and its 2nd place in the crypto markets, I don't think we're even scratching the surface of what Ethereum can achieve. If we consider Eth's price from the breakout of the last all time high, it paints a different picture as it hasn't performed half as well as bitcoin in that regard. These issues of gas prices are holding Ethereum back!
I understand why miners are complaining though, as they have monthly costs to pay in fiat to keep their operations going. In a lot of cases they are working within tight margins meaning they might make considerably less profits in the short term keeping their rigs active. But the miner's focus on short term gains will hold back Ethereum's long term prospects if allowed to continue unchecked.
Major financial entities are not going to build on Ethereum until the network becomes more attractive both in potential ETH price rises, and usability of the network. This proposal addresses both of these problems, paving the way for ETH to really take off in this bull market.
Miners will benefit in the long run too from the ETH price rise it will cause.
The End of the Binance (BSC) Defi Gold Rush?
The first quarter of 2021 has seen an astronomical rise in the price of Binance Coin (BNB) largely due to Binance smart chain offering a cheaper Defi solution to the Ethereum network. But this could be set to change with the implementation of Ethereum's EIP1559 Proposal.
It's undeniable that the adoption and use of Binance smart chain has happened at the expense of the Ethereum network. Binance offers a solution for entering the Defi space without having to pay astronomical gas fees, however, this comes with the caveat of accepting the risks of a centralized network.
We all know those dangers here on hive. The CEO of Binance was instrumental in helping Justin Sun implement the first wave of the network attack against steem in his hostile take over. CZ allowed the use of other people's funds (steem holdings) on his exchange to vote in sock puppet witnesses for Justin Sun's Tronit take over.
This is all ancient history in the fast moving world of blockchain, but it proves my point above. Binance is a centralized option. The point of failure comes down to one man, with a questionable history. The Ethereum network is decentralized, there are many points of failure against any attempt at centralized actions. This is the main reason why I think most people will flood back to Ethereum once the gas crisis has been solved.
Some other reasons include:
Ethereum is the first market mover on smart contracts - it can still claim the title of best, most adopted, decentralized smart contract blockchain.
Ethereum is already a known entity in the financial sector - the inclusion of Ethereum in futures contract trading with the CME Group cemented it's place as the worlds 2nd most well know cryptocurrency.
Most projects still choose to build on Ethereum despite the problems with gas fees - serious projects recognize the truth that decentralization is the core USP of the blockchain space.
I have nothing against BSC as a short term solution, I am going to participate in liquidity mining with bLeo and the CUB tokens that are being airdropped by 
In the short term I think that Ethereum will see a massive pump from this news in the run up to July and EIP1559. During that time there is no reason why the use of Binance smart chain tokens would decrease as they're still providing a cheaper alternative to current ETH gas fees. But in the weeks leading up to, and after, EIP1559 is implemented I think we could see a massive drop off in the price of BNB and the tokens associated with Binance smart chain. In the coming months I will be positioning myself based upon these theories.
What will you be doing in the run up to July?
Let me know in the comments below.
Thanks for reading 🙂
Nothing in the this post constitutes financial advice. These are my opinions and all investments should be researched and entered into at your own risk.
If you have enjoyed reading this post, please check out my homepage @raj808 for similar content.
https://join.swissborg.com/r/rowanKC4M
https://www.coinbase.com/join/joyce_pa
