Earlier today, Ethereum breached the $4,000 mark for the first time, making graphics card mining more profitable than ever before. However, this may a short-lived goldmine for cryptominers as the Ethereum Improvement Proposal (EIP) 1559 is going to go live in a couple of months (July). The London hard fork is a major change to Ether’s blockchain algorithm, improving the scalability and power efficiency by leaps and bounds.
At present, Ethereum works similarly to Bitcoin and other popular cryptocurrencies. A fixed block size is implemented which is used to specify the maximum number of transactions that can be processed in one block. This is where the miners come in. To include their respective transactions in this limited block size, users send their blockchain transactions to miners with a transaction fee. Miners then choose the transactions with the highest bids (transaction fees) and include them in the new block. These bids or transactions are basically the money miners get for mining Ether or any other cryptocurrency.
With the introduction of Ethereum 2.0 or EIP-1559, all transaction fees are going to be static without any bidding. However, the block sizes will still vary, most likely on the higher side. Many critics of Ether 2.0 argue that increasing the block size will make the transactions less secure, even if it does improve the bandwidth of the blockchain significantly.
Smaller block sizes are generally considered more secure as they result in fewer transactions per second which in turn makes it easier to run a node. At present, you can trade scalability for improved security…at a higher transaction fee. With Ether 2.0, that will no longer be the case, it’s essentially a dirty fix to the bandwidth limitation.
And then there’s the concern of the transaction fees to the miners. Since there is no bidding and the transaction fees are static, miners will essentially be paid little to nothing for devoting their machines to mining Ether. However, since the growth in Ether’s supply is expected to drop by several-fold, its price is likely to grow significantly, with some analysts expecting an increase to almost $10,000.