Ethereum network upgrade that will destroy coins could cause ‘explosive growth’ in the ether price, experts say | Currency News | Financial and Business News
A change in the Ethereum network that will cut limit the amount of ether tokens in existence could set the stage for “explosive growth” in the world’s second-biggest cryptocurrency, experts have said.
On Friday, Ethereum blockchain developers approved a major change to how the network runs, which will come into force in July or August.
It will overhaul the bitcoin rival’s current auction system, under which users send tokens to pay for transactions to be completed by miners.
Under the changes – known as EIP-1559 in Ethereum parlance – users will now send a base transaction fee to the network itself, which will destroy, or “burn” the ether tokens, reducing the number outstanding.
Cryptocurrency analysts have said limiting the amount of ether in existence, as the bitcoin system does, will put upward pressure on the price. When combined with the recent enthusiasm for crypto coins, the price could rise sharply, they said.
“What is most exciting to cryptocurrency traders is that now Ethereum will reduce the amount of outstanding ether by destroying some of the tokens every time it’s used to process some transactions,” Edward Moya, chief market analyst at currency firm Oanda told Insider.
“Ethereum’s never-ending supply was the least attractive part about it and now optimism is growing that the world’s most-used blockchain will see a major shift in retail and institutional buying.”
Justin d’Anethan, sales manager at cryptocurrency exchange Equos, told Insider the proposed changes to the Ethereum network should “not only make the blockchain more eco-friendly” by making transactions more efficient, “but should also make it more scalable.”
He added: “Add to this fewer coins in circulation, and you have a recipe for explosive growth.”
However, crypto skeptics argue that the surge in the prices of the world’s top cryptocurrencies has set them up for a sharp fall, as has been seen in the past.
The ether price has risen more than 130% so far in 2021, taking it to $1,734 on Monday morning. But that is well off a high of more than $2,000 touched in February.
It rose above $1,400 in 2018 before slumping to below $100 later that year.
The Ether Improvement Protocol-1559 changes are set to come into force in July or August as part of a system upgrade known as the “London hard fork.”