Ethereum London Hard Fork
The next major upgrade coming to the Ethereum blockchain is the London hard fork. Ethereum is undergoing its 11th backward-incompatible upgrade, also known as a “hard fork.” The hard fork includes five Ethereum Improvement Proposals (EIPs), each with code changes designed to optimize and improve the world’s second-largest cryptocurrency by market capitalization. Among those five EIPs, EIP-1559 is the most controversial among Ethereum stakeholders because it fundamentally redesigns the network’s fee-based market.
Okay, let’s start with the basics, and here are some frequently asked questions and answers about Ethereum’s London Hard Fork:
- When is the London Hard Fork?
- What is EIP-1559?
- What is a Gas Fee?
- What does it mean by Gas fee being removed or burnt from the network?
- What are the benefits of EIP-1559?
- What are the drawbacks of EIP-1559?
- Do ETH Owners Need to Do Anything?
When was the Ethereum’s London Hard Fork?
Ethereum had London Hard Fork on August 5th. It happened on block 12,965,000, which is roughly between 21:00 (UTC+8) and 1:00 (UTC+8).
What is EIP-1559?
EIP-1559 will radically change the feed dynamics of Ethereum by introducing a minimum fee to all on-chain transactions called the base fee. Now if you have ever been in crypto and you have ever transferred a coin especially an Ethereum coin or an Ethereum network you should know that there’s something called a gas fee.
What is a Gas Fee?
A Gas fee is pretty much a transnational cost that you pay which usually goes to the miner in order for your transaction to properly be sent from point A to point B. Now under EIP-1559 the base fee is set by the Ethereum protocol automatically and is removed or burnt by the network instead of being awarded to the miners.
What does it mean by Gas fee being removed or burnt from the network?
The base fee that you are paying is sent to a burn wallet or a dead wallet taking the coins out of circulation causing a deflationary effect. Sometime early next year, Ethereum is expected to transition fully to a proof of stake protocol meaning that validators instead of miners will take over the responsibilities of transaction, validation and block production. Which upgrades to proof of stake known to be named death merge. In a nutshell, it is basically Ethereum transitioning over to Ethereum 2.0.
What are the benefits of EIP-1559?
- Miners no longer receive income from transaction fees. Instead, it goes directly into the network to be burned. This can cause the circulating supply of ETH to begin to decline over time and increase the value of ETH.
- It helps people using the Ethereum blockchain to make it easier to predict the transaction fees. The congestion seen on this network has caused widespread anger. Three bull market threats, the explosive growth of NFTs, and the fast-growing DeFi sector exacerbate this situation.
What are the drawbacks of EIP-1559?
- Miners suffer from losing an important source of income. Especially considering that the 2 ETH currently received as a block reward is much lower than the 5 ETH received a few years ago.
- Miners are an important part of the Ethereum ecosystem. They are responsible for running the blockchain smoothly and validating transactions. However, the move to Proof of Stake will effectively eliminate it. That’s because their responsibilities will shift to validators, people who actually have a financial interest in securing the network.
Do ETH Owners Need to Do Anything?
Tim Beiko, the developer of Ethereum, emphasized that Ethereum owners who use cryptocurrency exchanges, web wallets, mobile wallets, or hardware wallets are not affected by London’s hard forks.
You can learn more about EIP-1559 in detail here:
https://github.com/ethereum/EIPs/blob/master/EIPS/eip-1559.md
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