A new paper released by individuals from Australian universities last month is putting the focus on Ethereum and its conceivable future as a store of significant worth. The paper, titled “Better than Bitcoin? Would cryptocurrencies be able to beat inflation?,” is wrote by Ester Félez-Viñas of the University of Technology in Sydney and other academics, and contrasts the issuance of Bitcoin and the new issuance model of Ethereum, that is making the currency deflationary. This has to do with the activation of EIP-1559, a proposal that consumes Ethereum in a corresponding manner to the use of the network.
While this proposal had some opposition when it was presented — mainly from miners and mining pools — it is now contributing to this new appreciation of Ethereum as a possibly deflationary currency in the future.
The paper states: We show that following the recent change in its transactions protocol, the digital currency Ethereum displays a significantly lower net issuance rate of tokens than Bitcoin, achieved by destroying the fees
associated with each transaction.
Burning Fees
The implementation of EIP-1559 has caused the network to burn a significant amount of Ethereum in fees. This change has led to more than one million ETH being put out of circulation after just three months of its implementation on mainnet. Regarding this, the study remarks:
Other cryptocurrency projects are adopting similar burning schemes hoping to recreate the same effect. Binance coin recently activated an update to its network that also implemented fee burning. However, Binance coin and Ethereum are fundamentally different: The latter has no cap on its issuance, while Binance coin does have a hard issuance cap.
In many cases the amount of Ethereum burned outpaces the network’s creation of new tokens, resulting in Ethereum potentially becoming the world’s first deflationary currency. We argue that this provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer a superior long-term value storage than Bitcoin.
News Summary:
- Ethereum Could Surpass Bitcoin As Best Crypto Store Of Value, Study Argues
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