The highly-anticipated ‘London’ upgrade has finally happened on the Ethereum network as ETH arguably moves closer to becoming a deflationary asset.
As Cointelegraph reports, the London hard fork arrived almost on schedule at around 0833ET this morning at block height 12,965,000, ushering in the Ethereum Improvement Proposal (EIP) 1559.
After yesterday’s surge, the price of ETH is sliding after the fork…
Source: Bloomberg
UPDATE: Ethereum is bouncing back…
Source: Bloomberg
Decrypt.co’s Liam Kelly notes that the fork brings about five key changes to the network, of which the most notable is EIP-1559.
Though it has been said that EIP-1559 will lower transaction costs on Ethereum, this isn’t perfectly accurate.
Instead, it will allow users to better estimate how much a transaction actually costs. This means that instead of blindly cushioning a transaction with extra gas to ensure that miners process the transaction, users can be more precise in their estimations—which will likely result in them paying less.
So, in a sense, it will lower transaction costs. But not quite in the same way that people are thinking about it.
Tim Beiko, a developer with the Ethereum Foundation, also said during The Decrypt Daily podcast that the cost won’t be a “20x reduction,” but rather a “20% reduction.”
EIP-1559 will also usher in what some have called an “ultra-sound” era for Ethereum by destroying those pesky mining fees altogether.
What is Ultra Sound Money 🦇🔊?
– Minimal viable issuance. A predictable block subsidy to pay block producers and just enough not to “overpay” for security.
– EIP-1559. Burn a portion of the network fee.
It is deflationary when:
-> burnt_network_fee > minimal_viable_issuance— Patrick McCorry 🦇🔊🌋 (@stonecoldpat0) July 25, 2021
With the London hard fork now live, the transaction costs that were previously paid to miners will now be burned and removed from circulation.
The thinking goes among Ethereans, including Beiko, that as more and more Ethereum is removed from circulation, there will be a sort of supply crunch. And as popular sectors within the ecosystem, including decentralized finance (DeFi) and non-fungible tokens (NFTs), create more demand for the cryptocurrency, its price is expected to rise.
The London upgrade and the subsequent activation of EIP-1559 is a mile marker of sorts in the transition to Ethereum 2.0, which will move the network from a proof-of-work consensus to a proof-of-stake consensus.
