ETHEREUM, a crypto with great power

Ethereum's blockchain developers approved one of the biggest changes to the network since its inception in 2015, a change that could lead to even greater gains in the price of its native cryptocurrency Ether.

The move will reduce the amount of Ether outstanding by destroying some of the tokens each time it is used to power transactions on the world's most widely used blockchain. Known as EIP 1559, the change solves a current problem where Ethereum users can only estimate how much Ether will be needed to process transactions, a guessing game that has spawned sites like ETH Gas Station to help people figure out how much to pay. EIP 1559, which will become part of an update in July or August, will incorporate an average price on the network itself making the guessing game obsolete.

The reduced supply of Ether will likely lead to a rise in prices as demand for the coins increases, said Eric Turner, research director at Messari, a cryptocurrency analytics firm.

This is probably one of the most important milestones that we have seen recently, "he said. Until EIP 1559 came into effect after its approval on Friday, the supply of Ether was theoretically infinite, leading to criticism that its policy Core currency was weak and inflationary. Now they're actually controlling inflation on Ethereum and in some cases, you're seeing negative inflation, so it's definitely important, Turner said.

Ether has seen an already incredible price surge in the last 12 months, along with Bitcoin and other digital assets. Ether has risen around 560% last year, while Bitcoin is up around 430%, according to data compiled by Bloomberg. Unlike Ether, Bitcoin has had since its inception in 2009 a fixed supply of 21 million coins that will ever be created. That difference has led Ethereum critics to say that it shouldn't be seen as a bitcoin-like digital currency.

Tim Beiko, a ConsenSys senior product manager who leads the protocol team implementing EIP 1559, compared the current pricing environment on Ethereum to a gas station where each of the four pumps is priced differently. In the future, "we will measure the demand for the network and put that average price as part of the network itself," he said. EIP 1559 fixes a bug in the Ethereum economics that we knew about from the beginning.

The proposal will also change a strange feature in Ethereum that no one really saw coming. Users can now pay an Ethereum miner to process their transaction with a credit card or other cryptocurrency, undermining Ether's role in its own blockchain, Beiko said. EIP 1559 makes Ether the only way to pay for transactions on the network.