Ethereum's London Hard Fork is All the Rage

ETH is hot in August, 2021 here's why:

Ethereum’s “London” hard fork has just activated and it’s a major change. Crypto prices are up and ETH itself is now over $3,000. Hard to believe!

Developers successfully completed a “hard fork” of Ethereum last Thursday, August 5, 2021, essentially changing the underlying code that the cryptocurrency relies on to run. The so-called “London hard fork” changes the way transaction fees are calculated on the network. 

• The London hard fork arrived almost on schedule at 12:33 pm UTC on Thursday at block height 12,965,000, ushering in the Ethereum Improvement Proposal (EIP) 1559.

• With the upgrade triggered, Ethereum will now undergo a significant overhaul of the network’s transaction fee market and other parameters such as gas refunds among others.

• Another change essentially sets the stage for a major transformation of Ethereum that will make it harder for miners to earn money and could eventually make mining irrelevant.

The London upgrade adds around 5 changes to the current Ethereum network; however, I believe that only 2 of them are crucial to day-to-day users. The changes are expected to attract more DeFi, as Ethereum’s network of Dapps already is well over 2,000 projects.

If you think of Ethereum like a highway, London is adding a few lanes to tamp down traffic and is standardizing toll prices. 

Positive momentum for Ethereum has led to bullish sentiment across the cryptocurrency sector so far in August, 2021.

The hard fork itself consists of five Ethereum Improvement Proposals. They are called EIPs for short, and each puts forth a set of changes to the code. 

The one that everyone is latching onto is EIP-1559.

With EIP-1559, users start paying a variable “base fee” for transactions that — instead of being paid to miners — is burned (read “destroyed forever”) in addition to an optional miner tip. But this is far from the only change implemented by this EIP.

EIP-1559 also allows for blocks to vary in size up to double the size that they were before, reducing network strain and nearly doubling the network’s throughput in times of need, which is in turn expected to result in lower fees when the network sees more use than usual.

Rather than holding a blind auction every block to determine the gas price, ethereum’s protocol will algorithmically decide the transaction fee based upon overall demand on the network. London is about crypto’s most important algorithm in a sense, as so many crypto projects are built upon Ethereum.

Making the block size dynamic so that it can accommodate fluctuations in demand is what ultimately stabilizes the base fee. Some proponents of the upgrade say it will catapult Ether to becoming a deflationary asset, as each transaction will trigger a portion of the total coin supply to be removed from circulation forever.

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.