“Experience from crypto world while being into home because of covid situation.” — Chapter one
“Hello World” — is the well-known sentence for all those who start learning programming or tech related stuff. Just like that, lockdown is becoming popular among everyone because of covid-19 and we already went through two waves of it. In the meantime, many of us learnt a lot of things while we’re being locked into our own home. I’m also one of those who spend few hours daily to learn a lot of stuff about crytpo-currency which was unknown to me previously. I’m going to talk about one topice as of now from those new stuff which is learnt in the lockdown time.
How ethereum transection works and gas price is fluctuated?
When bullish rally for bitcoin was started after the halving of 2020, defi space got huge attention from the retail investors and many successful projects was launched and investors got a lot of profits from those. But we get another problem of high gas price which wasn’t suitable for small investors at all. As soon as IDO (Initial Dex Offering) got the hype for defi projects, gas price was sky-rocketing in the meantime. Everyone was familiar with doing transection on ethereum blockchain, but many of us didn’t try to figure out how those transection are works and we only knew that ethereum’s using PoW (Proof Of Working) mechanism and we need to pay fee for that. When gas price started to increase, everyone was wondering how that’s possible and how it’s growing. The short answer for that is: ethereum transection system is based on auction as of now. So whoever will use high gas price to complete the transections, miners will pick those transection first to get more rewards. So as a result, gas price’s sky-rocketing when IDO hype is started and many participants started to use higher gas price so that they could buy new tokens from the IDO platform. Not only this, AMM (Auto-mated Market Maker) is becoming popular day by day. In simple world, we call those platform dex as we don’t need any 3rd person to monitors our trades to complete. So, ethereum gas price again started to incrase whenever a new defi project got listed into uniswap for the first time and supporters rushed to fillup their portfolio with the new defi tokens and that’s why used higher gas price than the suggested one. As a result, we get higher gas price for those investor’s action. But miners of ethereum was on profits for the whole time.
As a solution of the higher gas price, ethereum devs introduced EIP-1559 (Ethereum Improvement Programme 1559) which will incrase the block size more almost 2x from the current block size which means more data hash will be stored into that. Not only this, EIP1559 will replace the current auction based transection system with burn mechanism after implementing this. As of now, it’ll be deployed through London Hardfork which might happen around first week of august, 2021. So lets wait for the result of it as everything has pros and cons.