Ethereum’s London Hard Fork upgrade: What’s it all about?

The popular, open-source, blockchain was redesigned on August 5. It is now more attractive than ever for ethereum lovers. This boosted the intraday growth rate of Ether by 4.16 per cent to trade at 2,790 USD.

What is the London Hard Fork?

The Ethereum Improvement Protocol 1559 (EIP-1559) was originally known as a hard fork. It is essentially an unchangeable permanent modification to the blockchain. London is the first to precede the change name. This is because the community wants to name these upgrades after cities that have hosted their Devcon international developer’s conferences.

The change, notably, is a backward-incompatible upgrade, which means that post the activation of this protocol, downloading London would be mandatory if you wish to stay connected to the Ethereum network.

Greg Waisman is the co-founder and chief operational officer of Mercuryo’s global payment network. He stated that “the highly anticipated Ethereum London hard fork” event will allow users to have a more flexible and lower fee structure. This will also create a mild burn effect which will be billed as making Ether deflationary.

This protocol’s main purpose is to establish a transparent and predictable transaction fee structure for the network users. Before this upgrade, every block was subject to a blind auction to determine the gas price. This is the fee or pricing value required to transact on Ethereum. This meant that users had to predict and pay much higher gas or transaction prices in order to be included in the next block of transactions. This meant that transaction prices were higher during busy periods and then lower during quieter times.

WazirX co-founder Nischal Shetty

WazirX co-founder Nischal Shetty said that the upgrade will prevent any network congestion from causing an increase in ETH gas prices. This price transparency will help to increase adoption of decentralised apps. The process of burning ETH will decrease its supply, and thus, increase its price value in comparison to Bitcoin, which has a finite market supply. Although it might seem odd to burn ETH rather than pay miners for validating blocks, miners will reap the benefits of the increase in ETH’s value. A second important upgrade for Ethereum is its transition from Proof of Work into Proof of Stake by 2022. This will eventually result in less energy consumption by miners through block generation.

This is a sign of a significant, imminent change in the structure of the blockchain. It will shift from a PoW to a PoS (Proof Of Stake) due to concerns about sustainability and viability. PoW is focused on solving complicated mathematical puzzles using large amounts of electricity, costly mining infrastructure, slow transaction processing, and slow transaction processing. PoS, on the other hand, does the same job but consumes less energy and allows the user to support a cryptocurrency through creating blocks of the same on blockchain. This could make miners obsolete in a few decades, some argue. They can still sell their computing power and earn ether in anticipation, but the money flow would be significantly reduced.