- Ethereum’s London hard fork includes the much anticipated EIP-1559 upgrade that corrects the network’s high transaction fees.
- The upgrade propelled Ethereum to a 12-day winning streak, which is a record for Ether.
- Investors are pricing ETH at above the $10,000 mark as the network will include a deflation system.
It’s official now – Ethereum London Hard Fork upgrade is here. The much anticipated upgrade was launched on August 5th at block 12,965,000. Moving to a proof-of-stake consensus requires the completion of multiple steps, among which the London upgrade is included.
However, the proposed network upgrade has been criticized by miners and developers alike as it might only partly solve the network’s main issues of scalability and interoperability.
Reprimanding Miner Contributions
One of the main publicly discussed EIP’s is the EIP-1559, which makes Ethereum transaction fees transparent. After this upgrade, Ethereum transactions now have a base fee. In the current network, fees are subject to demand based on how busy the network is. This meant that miners could charge premium prices, thus making transaction fees highly volatile.
The upgrade has been criticized by miners, given that Ethereum will implement a “base fee” that would make transaction fees clear in advance. In contrast to the previous fee model, the “base fee” is now burned, and miners can only receive a partial contribution fee for their participation. Despite this shift, miners are still entitled to charge a “tip” in exchange for faster transaction processing.
The announcement of the upgrade prompted miners to retaliate by announcing the attempt to mirror a 51% attack on the network, though this did not pay off as planned. Previously, miners could select transactions for the highest bid, thus providing them with a financial boost. But this meant that the Ethereum network came under scrutiny as large transaction inputs during the DeFi and NFT boom generated excessively large transaction fees.
On The Flipside
- Transaction fees might still be high if the high network demand persists.
- Both Ethereum and Ethereum 2.0 will operate in tandem until Serenity concludes in 2023.
- Paying tips for faster transaction completion is similar to the current process, however, the decision of payment will rest with the user, not the miner.
Similar Fees + Lower Supply = More Financial Incentives
Ethereum’s developers have emphasized that the London hard fork is not a substitute for lower fees or increased scalability. It is instead meant to increase fee transparency while decreasing price manipulation. While miners remain opposed to the upgrade, Poolin co-founder Li Tianzhao emphasized that the update will have an “almost negligible” effect on miners. Ryan Berckmans also noted that miner rewards may decrease by at most “20% or 35%,” indicating that miners will not yet be sidelined.
Still, miners have heavily contributed to the growth of the network, and their participation was rewarded with ETH tokens. The London fork’s burning mechanism means that the total supply of Ethereum will decrease over time. As a result, the value of ETH tokens might increase as more are burned. Vitalik also highlighted that Ethereum would become similar to Bitcoin in being a store of value token due to its scarcity.
Researchers are pricing Ethereum at between $5,000 and $10,000 as ETH token supply will further decrease. Moreover, the ETH Beacon Chain is currently reporting new ETH validator highs of over 202,000, which amounts to 6.69 million ETH staked. As such, miners will still benefit from the London upgrade both as a result of token scarcity and the previous ETH mining.
What London Will Bring to Ethereum
The London hard fork is the most talked about subject in the cryptoverse right now as it heavily impacts network mechanics. According to Chris Burniske, Ethereum has become more in demand than Bitcoin as investors are speculating about a surge in prices.
Though when considering the trader mantra of “buy the rumor, sell the news,” it is likely that the price of ETH will not skyrocket immediately. ConsenSys developer Ben Edgington emphasized that the effects to the network are still unknown, and cannot be predicted “until it’s deployed.”
What’s certain is that Ethereum’s altcoin supremacy will not be challenged. IntoTheBlock tweeted that Ethereum underwent its longest price winning streak ever, with a total of 12 days in which 1.19 million addresses purchased more than 2.03 million ETH.
Generally speaking, accumulation periods such as this indicate that investors are preparing for favorable price improvement following the London upgrade and beyond.