Learn more about the Ethereum London hard fork in this article. Before getting into further details, let me give you a brief description of the Ethereum network.
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Firstly, the Ethereum network went live in July 2015. Since then, the network has continuously implemented stages of development for its mainstream users. For instance, Ethereum is a smart contract platform that hosts a majority of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) projects. More so, the platform also conducts Initial Coin Offerings (ICOs), and over $1.3M transactions a day.
Ethereum developers are ever working towards improving the ETH network for its users. Currently, the network announced the Ethereum London hard fork. The update is yet another step towards the full implementation of Ethereum 2.0. In detail, Ethereum 2.0 is ETH’s move from Proof-of-Work to Proof-of-Stake.
This upgrade follows the Berlin hard fork that took place in April 2021. Specifically, the Ethereum’s London hard fork update aims to ease transaction fees on the Ethereum network.
The Ethereum 2.0 Mainnet Upgrade
Amongst the issues affecting the Ethereum network is lack of scalability and high gas fees. The aforementioned problems seriously affect traders and decentralized application (DApp) developers. Thus, ETH is transitioning from Proof-of-Work (PoW) consensus to Proof-of-Stake (PoS) as a solution to its main issues. This process is known as the Ethereum 2.0 mainnet upgrade.
Ethereum 2.0 means moving to a less-congested blockchain with lower gas fees. Additionally, validators and not miners will confirm block transactions and therefore receive block rewards.
Even more, Vitalik Buterin one of the Ethereum founders says:
When the blockchain finally transitions 2.0 could eventually see the network speed up to around 100,000 transactions per second using sharding and other tactics.
The upgrade is totally relevant. It improves the cost and performance issues Ethereum faces. This is along with other scalability efforts in sharding, ZK Rollup, and sidechains. On the other hand, the ETH 2.0 procedure is complex. It requires years of developing, testing, and implementing before it’s completed. Hence, the implementation of Ethereum London hard fork.
The Ethereum London Hard Fork Journey
Notably, the Ethereum London hard fork is named after the second-annual Ethereum developer’s conference in 2015. Following the success of three testnets — Ropsten, Goerli, and Rinkeby — Ethereum London hard fork is set to launch at block 12,965,000.
Ethereum London Hard Fork EIPs
Included in the Ethereum London Hard Fork are five code changes known as Ethereum Improvement Proposals (EIPs). These are changes to the code that must be agreed to by stakeholder consensus. The Ethereum London hard fork contains several EIPs, most notable of which are 1559 and 3554.
The #ethereum London hard fork consists of 5 EIPs :
1.EIP-1559: Fee market change for $ETH 1.0 Chain
2.EIP-3554: Difficulty Bomb Delay to December 2021
3.EIP-3529: Reduction in Refunds
4.EIP-3541: Reject new contracts starting with the 0xEF byte
5.EIP-3198: BASEFEE opcode
— Young And Investing (@QuintenFrancois) June 27, 2021
Most importantly is the implementation of EIP-1559. It’s the core feature of the Ethereum London hard fork update. EIP-1559 makes transaction fees volatile on Ethereum and introduces a base fee for transactions. Likewise, with transaction fees burned, this lowers the supply of ETH over time.
Ethereum co-founder Vitalik Buterin, Eric Conner, Rick Dudley, Matthew Slipper, Ian Norden, and Abdelhamid Bakhta introduced EIP-1559 stated:
[EIP 1559] introduces changes to the block header, adds a new transaction type, comes with new JSON RPC endpoints, and changes the behavior of clients in several areas (mining, transaction pool, etc.). It is highly recommended that projects familiarize themselves with the EIP.
Advantages and disadvantages of EIP-1559
Here are the advantages and disadvantages of EIP-1559:
|Make transaction fees volatile on Ethereum by introducing a new ‘base fee’.||The EIP process highly reduces earnings for miners.|
|Under EIP-1559, fees are regulated to increase and decrease. This depends on how congested the network is.||It is alleged that mining pools threaten to attack the Ethereum network if EPI 1559 is implemented by shutting down their machines and weakening the security of the network.|
|Burning base fee.||Miners earn from tips and block rewards. However, the tips are less than the base fee.|
|Reduces inflation. The crypto becomes bullish and increases in value||While the base fee can be burnt, users can simply resort to outbidding each other. Also, it introduces economic instability to the network by making it impossible to control what the total supply of ether will be over time.|
|Removes fee manipulation bearers. Malicious miners filling up blocks with empty transactions to inflate market prices|
Meanwhile, ETH London is a hard fork. Being a hard fork means all nodes must comply with the new rules and the latest version to continue mining and validating.
Furthermore, Ethereum developers have also introduced EIP-3238: ‘Difficulty Bomb Delay’. This Difficulty Bomb increases the PoW puzzles’ difficulty level. As a result, it increases the mining difficulty. Therefore, longer block times and therefore less reward for miners.
Moreover, initial plans indicate that EIP-3238 would delay the so-called time bomb until the second quarter of 2022. However, the more recently proposed EIP-3554, whose review period has ended, would postpone the difficulty bomb “to show the effect the first week of December 2021.”
Use Cases of Other EIPs
EIP-3198– It’s essential for the reduction of fees on transactions that use smart contracts. Smart contracts are programs stored on the blockchain to carry out instructions. In the case of DeFi apps, smart contracts cut out the middleman while supplying people with loans or interest.
EIP-3529-The proposal removes refunds for certain opcodes. Removing or reducing the refunds through EIP-3529 makes the network more stable.
EIP-3541– Above all, EIP-3541 mostly sets the table for future updates. The EIP reserves some space within the network to create new types of smart contracts.
Ethereum is gaining more and more users leading to network congestion and slow transaction speed. This affects the cost and performance of the blockchain. Ethereum handles far less than the transactions handled by the Solana blockchain. Which are 65 000 transactions per second. Thus, Ethereum seeks to address the scalability issue through the Ethereum London hard fork update.
In the same vein, Ethereum (ETH) is the second-largest in terms of market capitalization. Most importantly, the altcoin reached its all-time high of $4,356.99 on May 12, 2021. Thus, some crypto experts believe ETH could surpass BTC and take the first position in the future.
However, the high transaction fees on the Ethereum network are a hindrance to the use of the ETH cryptocurrency. Specifically, the average transaction fees on ETH hovered around the $16 to $20 range. Following after, they climbed as high as $100 on DApps like Uniswap that have high trading volumes. Such a hike makes ETH non-ideal for daily retail use.
The Ethereum London hard fork is expected to make the cryptocurrency less inflationary. Moreover, this helps prepare for the rolling out of Ethereum 2.0 in the time to come. Of note, the ETH price has enjoyed a good rally so far in the year 2021. The crypto started the year at a value of $1,300. Its value rose above $4,000 and then plunged once more.
Ethereum’s Transition From PoW to PoS
Meanwhile, Ethereum’s transition from PoW to PoS is an update that many are eagerly looking forward to. In order to become a validator on the Ethereum network, a user needs to lock at least 32 ETH in the network’s official smart contracts.
This process also reduces ETH’s active supply. Therefore, crypto analysts see it as a sign of another bull run. It provides the demand for ETH tokens to increase against a decreasing supply. The Ethereum community believes that the move to ETH 2.0 is a solution designed to address scalability issues. It will also solve the problem of skyrocketing gas fees.
Shanghai Hard Fork
After the ETH London hard fork, the Ethereum network is set to release the Shanghai hard fork. Apparently, the Shanghai hard fork is scheduled to go live by the end of the year. The Shanghai hard fork is set to be the last phase of the journey towards integrating ETH1 to ETH2. Furthermore, the Shanghai hard fork upgrade is likely to take place in October 2021.
In conclusion, the Ethereum network is pushing towards achieving the ETH 2:0 goals of a more scalable, safe, and sustainable ecosystem. Every year Ethereum introduces improvements to its architecture. All these aim to improve a myriad of scalability problems such as high gas fees, low throughput, network congestion, and more.
Therefore, the Ethereum London Hard Fork is a necessary update for a better user experience. Ethereum has drawn the attention of global financial institutions. The altcoin remains the gold standard for smart contracts and blockchain-based applications.