Ethereum Brings New Proposal to Increase Efficiency: Token Holders Might Get Rich

Ethereum is planning on improving its existing fee model. The current fee model in Ethereum is very inefficient and costly to the users. Therefore, Ethereum brings the efficiency proposal to the crypto community in order to remove inefficiency.

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This proposal could prove beneficial for the ETH token holders as it might make them rich.

The main purpose is to improve Efficiency

By bringing this proposal, Ethereum aims to improve and increase efficiency in the fee market. This proposal eyes to burn a portion of fees paid to miners. EIP 1559 has proposed a new way to create better fee price efficiency and to reduce the complexity of client software that is required to avoid unnecessarily high fees.

According to the proposal, there are two components to a transaction fee suggested by the authors Vitalik Buterin and Eric Connor. These components are a base fee and a premium.

The base fee can move up or down and is set as per demand for block space. If network activity is higher, the base fee would increase and if the network usage is lower, it will decrease. On the other hand, premiums can also be set high or low keeping in view the users’ preference. The base fee gets burned while the premium is given to the miner. This is how this mechanism works.

Ethereum’s policy of minimum necessary issuance

Ethereum has a monetary policy (the policy of minimum necessary issuance. This is defined by the rewards that are paid out by the protocol at any given time and the community can decide the viable parameters on block rewards. This means that there is no supply-cap and that Ethereum does not have a fixed supply.

This proposal will prove beneficial for the developments in the broader DeFi space as well and therefore, it is praised by various community members. Ethereum network will become more efficient with ETH staking and EIP 1559. And it is expected that this efficiency proposal could make the ETH token holder rich.

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Author: Melanie Young

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