Finally! The long-awaited Ethereum London hard fork will go live on the mainnet today, August 5. The upgrade is an important step for ETH’s Tokenomics as well as to the impending launch of the Ethereum 2.0 project, which will replace Ethereum’s current “proof of work (PoW)” protocol with a “proof-of-stake (PoS)” by the end of this year.
Notably, the London hard fork was supposed to be launched in July but postponed to August to allow for sufficient review on various testnets. Since then, the upgrades have been seamlessly produced on Ropsten, Goerli, and Rinkeby all in the past few months.
With everything all clear, the Ethereum community is eagerly looking forward to what seems to be the most ‘crucial’ upgrade to the network in recent memory.
However, the news of the Ethereum London upgrade is not complete without mentioning the Ethereum improvement proposals (EIPs) 1159 and 3554. Although there are three other EIPs collated in the upgrades, it may be difficult to understand why these two are especially necessary for the future of Ethereum.
London Upgrade Allows Ethereum to Take On Bitcoin
Unlike Bitcoin, which has a limited supply of 21 million, the supply of ether is not fixed. With such an unlimited supply, Ether is less likely to compete against Bitcoin as a hedge against inflation, a primary reason many people choose to buy bitcoin. The Ethereum network will roll out the EIP 1559 and 3554 to resolve the token inflation problem.
The more significant one, EIP 1559 is a new feature to make Ethereum less inflationary. As the ether gas fee keeps fluctuating, EIP-1559 will implement a fee-burning mechanism that will “burn” the base fee, that is to destroy the Ether used, thus reducing the total circulating supply.
For its own role, the EIP-3554 will work on Ethereum’s “difficulty time bomb”. This term concerns the concept behind the difficulty of Ether’s mining algorithms. The upgrade will increase mining difficulty, making it more complicated as time goes by; a move to effectively facilitate the switch from PoW to PoS.
This will reduce the number of miners since it will lead to an increase in both the computing power and energy required to compute transactions but a decrease in the mining reward ratios, making mining unrealistic economically. The launch of the time bomb will not happen soon as it has now been delayed to 1 December, ahead of the merger from PoW to PoS.
The launch of the Ethereum 2.0 project, which will replace the current Proof-of-Work (PoW) system with Proof-of-Stake (PoS) consensus, will reduce the risks of miners’ attacks on the network and also conserve more energy. Ethereum core developers believe the switch will put the network in line for mainstream adoption and less under scrutiny like energy-intensive Bitcoin.
Even prior to the full launch of the new network, Ethereum users had started staking their ETH on the network. Currently, according to data on Etherscan, ETH holders have “staked” more than 6.5 million ETH, an increase from 5.3 million in the previous month. The value of the amount of Ether staked is currently at $17 billion.
These are undoubtedly exciting times for Ethereum and the loyal community will be hoping that the upgrade goes without any glitches and provides a stepping stone for even greater adoption.
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