The current inflation is also affecting the cryptocurrency sector. Declining prices in the market have become worrisome and the resulting effects are unsustainable for most digital assets. The price of ETH has fallen again in recent hours and the second crypto in the world in terms of valuation has recently experienced a maximum level of inflation.
Ethereum EIP-1559 and Inflation
The global economy has had an impact on the cryptocurrency market for several years. As a prelude to possible crises that could hit it, Ethereum had made an update last summer: the EIP-1559.
Its main advantage was to reduce the excess transaction fees paid. This solution, which was a priori a godsend, should contribute to making ETH a deflationary currency. But today this is not yet the case. ETH is in freefall. The objective pursued by the EIP-1559 was in fact to burn the ether collected from the fees associated with the verification of transactions on the network and make the crypto deflationary. But we have seen the opposite effect. Since transaction fees have been reduced, the supply has become excessive.
The ‘Merge’, Ethereum’s long-awaited upgrade, is expected to help deflate supply using EIP-1559 by burning ETH and making the crypto deflationary.
Like most other cryptos, ETH is going through a period of great turmoil. This is mainly due to the global situation and partly to the EIP -1559 update. The next “Merge” upgrade is highly anticipated to correct the situation.
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