ETH 2.0 and EIP-1559 contributes to Ethereum’s Long Term Value Proposition

Delphi Digital,a crypto research company stated that the initiation of staking by ETH2 & EIP-1559 would lend to a more reliable long-term value proposition

By Komal Joshi · Aug 4, 2020 . 5min read

Unlike Bitcoin, Ethereum has not received the status of being a digital store of value. What is the problem? As the asset has gathered some 100,000% after the project’s initial coin offering. Still, fund managers, have recommended that funding in the cryptocurrency over extended time frames may make little sense. Yet Delphi Digital, a significant cryptocurrency research company, argued in a recent report. The initiation of staking by ETH 2.0,  implementation of Ethereum Improvement Protocol 1559 (EIP-1559) would lend to a more reliable long-term value proposition for the cryptocurrency.

“The State of Ethereum 2020” in respect to ETH 2.0 & EIP-1559

ETH’s prevailing economic model is not favourable to its long-term success. This is according to Delphi Digital’s “The state of Ethereum 2020” report currently shared. “The dApps built on top of the Ethereum network are driving increasing fees leading to more scarce bandwidth, but are parasitic in that the on-chain value derived from the activity does not increase fundamental value to ETH.”

Delphi writes that this transforms with the introduction of Proof of Stake. Also, with ETH2 and the implementation of Ethereum Improvement Protocol 1559 (EIP-1559). These two technical modifications will operate in tandem. It will enhance ETH demand while decreasing supply. Thus, promoting the cryptocurrency’s fundamental outlook. Here’s a quote from the report that stated:

“Tying things together, EIP 1559 and staking [create a] symbiotic relationship where not only does increase usage drive value but the introduction of cash flows to a wider group of participants for securing the network creates a more effective long term value proposition [for ETH].”

The issue right now is that Ethereum has an unpredictable monetary policy. It may disincentivize investors from embracing the cryptocurrency over the long run. In executing staking and the EIP, which advances long-term holding of ETH and may reduce the coin supply over time, the case to hold the asset grows much stronger.

For more recent updates about ETH 2.O and EIP-1559, follow Cryptodose.