Ethereum London Upgrade on Track to Launch on August 4: A Critical Overview
The forthcoming upgrade to the ethereum network, known as the London hard fork, is eagerly anticipated by the cryptocurrency community. The upgrade will introduce significant changes to the way transaction fees operate on the ethereum blockchain and could potentially boost the price of ether coins. The upgrade is already being rolled out on test versions of the blockchain, and according to ethereum developer Tim Beiko, the upgrade is ready to hit the main ethereum network, or “mainnet”, on August 4. The purpose of this essay is to critically examine the implications of the London hard fork and its potential impact on the cryptocurrency market.
London Hard Fork: Changing Transaction Fees on the Ethereum Blockchain
The London hard fork introduces a major change to the way transaction fees work on the ethereum blockchain. Currently, users bid to have their transactions verified by miners. However, under the new protocol (ethereum improvement protocol 1559), users will pay more predictable fees. This change is expected to make the fees more user-friendly and eliminate the bidding process. Furthermore, a portion of the so-called gas fee will be “burned” or destroyed after each transaction, which could result in a reduction of ether coins in circulation, leading to a potential increase in the price of ether coins.
Implications of Lower Ether Supply for the Cryptocurrency Market
The reduction of ether coins in circulation due to the burn rate could make ethereum more competitive with bitcoin as a store of value. Investment bank Saxo recently noted that this could be beneficial for the cryptocurrency market, particularly for investors who are seeking a diversification of their crypto portfolios. However, critics argue that this could lead to a shortage of ether coins, which could affect the overall liquidity of the cryptocurrency market.
Ethereum 2.0: An Even Bigger Overhaul of the Ethereum Network
It is important to note that the London hard fork is just one of the upgrades planned for the ethereum network. Ethereum 2.0 is set to introduce an even bigger overhaul of the blockchain. Under ethereum 2.0, the blockchain will operate on a proof-of-stake system where users must put forward an ether “stake” to gain the right to validate transactions and earn coins. This system is expected to provide a more energy-efficient and cost-effective way of maintaining the ethereum blockchain, while also addressing some of the scalability issues that have plagued the network in recent years.
Conclusion: The Future of Ethereum and the Cryptocurrency Market
The ethereum London upgrade is a significant development that could have far-reaching implications for the cryptocurrency market. The change to the transaction fees is expected to make the fees more user-friendly and eliminate the bidding process, while the burning of ether coins could lead to a potential increase in the price of ether coins. The reduction of ether coins in circulation could make ethereum more competitive with bitcoin as a store of value. However, critics argue that this could lead to a shortage of ether coins, which could affect the overall liquidity of the cryptocurrency market. It is important to monitor the developments in the ethereum network, particularly as ethereum 2.0 is set to introduce an even bigger overhaul of the blockchain.