B
blockchainx424
Member
- PG Coin
- 2,708
Solving inflation in Ethereum
Although Vitalik Buterin and his team have tried to find solutions to this problem, the reality is that the measures taken have proven insufficient. For example, on August 5, 2021, when Ethereum was still working under the Proof of Work scheme, a controversial improvement was activated: EIP -1559 . This improvement sought to solve some of the serious tokenomics problems that Ethereum was facing then:
Insufficient reach and negative effects
EIP-1559 sought to solve the issuance problem with two important adjustments: changing the measurement formula in the Ethereum gas price and adding a burning factor in each new block. Thus, the aim was to subsidize (yes, it is a subsidy, even if Ethereum devs don’t like the word) the cost of Ethereum operations and at the same time burn ETH to reduce inflation.
A study carried out in 2022 indicates that although the measure had a strong impact on fees and the issuance of Ethereum, it was insufficient to correct the problem. For example, the gas expense for each ETH block after the hard fork that activated EIP-1559 (London) varied between 0 and 30 million Gas, when before the hard fork it was 15 million. Although this may seem like progress, the reality is that the real impact on the price of Gas is minimal, as seen in the following graph. Please note from 2021 onwards that it already shows the corresponding subsidy.
In addition to this, the measures taken by EIP-1559 encouraged the arrival of MEVs and their manipulation of operations, making this practice more profitable and exposing operations to censorship practices, as has actually happened. In any case, the issuance of ETH has been unstoppable and, although growth has flattened in the last year, the supply continues to increase.
visit : Create ERC20 Token To Ease Your Business Finances In Web3.
Although Vitalik Buterin and his team have tried to find solutions to this problem, the reality is that the measures taken have proven insufficient. For example, on August 5, 2021, when Ethereum was still working under the Proof of Work scheme, a controversial improvement was activated: EIP -1559 . This improvement sought to solve some of the serious tokenomics problems that Ethereum was facing then:
- First, stabilize transaction fees. Episodes of high volatility made it too expensive to use this network. At that time, many Ethereum DeFi users were forced to pay fees of up to $500 to make a trade. Most of the time they were basic token withdrawal operations from DeFi pools.
- On the other hand, EIP-1559 sought to solve the problem of transaction delays, which caused price fluctuations. This was reflected in operations that took hours to be confirmed or that failed outright.
- Finally, resolve the inefficiencies of price auctions by confirming operations within the chain. This last situation also impacts security, since Ethereum has a block confirmation model that allows so-called “Uncle Blocks.” Uncle
Insufficient reach and negative effects
EIP-1559 sought to solve the issuance problem with two important adjustments: changing the measurement formula in the Ethereum gas price and adding a burning factor in each new block. Thus, the aim was to subsidize (yes, it is a subsidy, even if Ethereum devs don’t like the word) the cost of Ethereum operations and at the same time burn ETH to reduce inflation.
A study carried out in 2022 indicates that although the measure had a strong impact on fees and the issuance of Ethereum, it was insufficient to correct the problem. For example, the gas expense for each ETH block after the hard fork that activated EIP-1559 (London) varied between 0 and 30 million Gas, when before the hard fork it was 15 million. Although this may seem like progress, the reality is that the real impact on the price of Gas is minimal, as seen in the following graph. Please note from 2021 onwards that it already shows the corresponding subsidy.
In addition to this, the measures taken by EIP-1559 encouraged the arrival of MEVs and their manipulation of operations, making this practice more profitable and exposing operations to censorship practices, as has actually happened. In any case, the issuance of ETH has been unstoppable and, although growth has flattened in the last year, the supply continues to increase.
visit : Create ERC20 Token To Ease Your Business Finances In Web3.
