This is an exciting week for Ethereum update as the world’s largest smart contracts platform will implement the significant EIP1559 upgrade on August 04, Ethereum core developer Tim Beiko confirmed in a recent tweet. The fees optimization, security optimization and scarcity engine EIP1559 will be active on the block 12,965,000 in the upcoming London upgrade. By burning supply and achieving minimum viable issuance, EIP1559 is likely to transform Ethereum into ultrasound money, which actively reduces it’s supply with usage. It’s currently available on testnets and a countdown timer can be found here.
However that’s not the only significant news to come out of the Ethereum camp. Almost 6.5% percent of the Ether (ETH) supply became locked on the Eth2 Beacon Chain deposit contract. The first ever digital asset bank from Switzerland Sygnum AG announced on July 10 that they will offer ETH2 staking. They will give up to 7% per annum yield for their clients.
Sygnum is also providing institutional grade custody, high security and segregated wallets. This is alongside simple interface to abstract the complexity from the staking process. According to Sygnum, it “offers a digital asset alternative for yield generation in today’s low or negative interest rate environment”.
About Ethereum Staking
Ethereum staking allows anyone with 32 ETH (or even fractions through some specialized protocols) to deposit on the Beacon Chain. This puts it to be use directly by the stakers or through a delegated party running a validator node, processing activity and providing security to the network, for constantly generated rewards and fees paid by users.
The Ethereum Improvement Proposal (EIP1559) will improve the security model, create better fees, burn ETH supply and improve the UX. It replaces the first-price auction model with a more deterministic base fee model, in which the base fee would be burned.
The miners would therefore only profit from the “tip” on the network participant to get their transactions mined faster. EIP1559 also improves the Ethereum long-term security of minimum viable issuance. This happens by not paying miners and later validators any more than is absolutely necessary.
It also allows ETH to become deflationary by causing Ethereum supply reduction proportional to usage and therefore result in rising in its price, by limiting circulating supply. This makes attacks more expensive and the chain more secure, once Ethereum completely switches to Proof of Stake (POS). It also synergistically assists Ethereum Layer 2 solutions, disincentivizes chain spamming further, and breaks economic abstraction.
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