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December 8, 2022
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Hard fork London: Update promises to make Ethereum deflationary

Update has already been released on two Ethereum test networks

Ethereum’s next hard fork, called London, could arrive in July. He has already been released on the Ropsten and Goerli test networks and should be released soon on the Rinkeby test network.

If all tests are successful, a release date will be set, which could probably be late July or even August 2021.

What does hard fork London mean for the Ethereum network?

London is actually just a protocol update, following Berlin, and includes five EIPs.

The most important is the EIP-1559, which modifies the rates of the Ethereum 1.0 chain.

This EIP features a fixed base rate for transactions, but can be varied by algorithms so that it increases when blocks are above the gas target or decreases when they are below.

The base rate is then burned off.

Currently, Ethereum’s transaction fees are based on a simple auction mechanism, where users submit transactions offering a certain gas and miners choose the transactions with the highest bids.

This leads to a number of inefficiencies that EIP-1559 aims to address with the introduction of the new fee structure.

The new fee structure provides a discrete base fee for transactions that are included in the next block, with the option for users to prioritize their transactions by adding a so-called “priority fee” to incentivize the miner for faster inclusion. The miner pockets the priority fee while the base fee is burned.

The other EIPs introduced by London are EIP-3198, EIP-3529, EIP-3541 and EIP-3554.

The latter serves to delay the effects of the so-called “difficulty bomb” until December 2021.

Since the Ropsten test network was updated with the London hard fork on June 24, the ETH price has returned well above $2,000, perhaps due in part to expectations surrounding this update.

In fact, it is assumed that EIP-1559 in particular will make ETH 1.0 deflationary, or at least inflationary, although this update does not apply to ETH 2.0 which, being based on Proof-of-Stake, will not require mining.

For example, according to ConsenSys director of communications and content James Beck, burning the base rate will put deflationary pressure on the issuance of new ETHs, but the strength of this is difficult to estimate as many variables need to be taken into account , such as number of transactions and network congestion. Theoretically, the more transactions there are, the greater the deflationary pressure, since the base rate for each transaction will be fixed.

However, these issues will definitely be resolved with the future move to PoS.

Source: cryptonomist

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