Ethereum’s London Upgrade is a significant step on the path to Ethereum 2.0 but it is not without its tensions. The London Upgrade is a hard fork for the cryptocurrency, meaning that it is not backwards compatible with the previous versions of the Ethereum (ETH) blockchain.
Among the five Ethereum Improvement Proposals (EIPs) being implemented as part of the London Upgrade, the most controversial is the change to mining rewards.
EIP-1559 – Impact on Miners, Prices, and Developers
Once enacted as part of London, EIP-1559 will mean that all transaction fees on the Ethereum network no longer get paid to miners. Transaction fees will instead go to the Ethereum network itself to be burned. Miners will instead receive the block reward without the transaction fees, and a new, optional “Inclusion Fee” – a sort of tip from users who want their transactions to be prioritized on the network.
While this is a sensible step on Ethereum’s intended path to switch from Proof of Work to Proof of Stake, miners are rightly concerned that their income would be affected by EIP-1559. However, there is negligible risk that there will be a mass exodus of miners, who currently validate the transactions on the network. The London hard fork also includes EIP-3554, which is a delay of the Ethereum difficulty time bomb to December 2021, which will smooth out incomes for the miner community.
Ethereum has long been on a path of phasing out mining, and these changes come as no surprise to the ecosystem. The least efficient miners will drop out of the race, and the resulting equilibrium should keep mining ETH as profitable (or unprofitable) as it ever was.
The overall effect of SIP-1559 on the supply of ETH will be significant. Unlike Bitcoin (BTC) with its fixed supply cap of 21 million, the amount of ETH in circulation grows every day without a cap. The switch to burning transaction fees will significantly reduce the rate at which the total supply of ETH grows, and will lead to an upward trend in the price of ETH.
For developers and users of the Ethereum network, EIP-1559 makes gas fees more predictable. There should be almost no impact to total transaction times or costs, but a new option to pay for priority will be a boon to developers and users who are being held back by long transaction lead times.
Next steps for Ethereum, and for you
Ethereum is on the path to Ethereum 2.0, and the next major step on the way after the completion of the London Hard Fork Upgrade is the merger of the Ethereum mainnet with the Ethereum Beacon Chain.
Current holders of ETH do not have to do anything unless they want to trade in or out of a predicted price movement. Huobi Global, along with nearly every major ERC-20 wallet provider will support the London Hard Fork Upgrade. As a precaution, deposits and withdrawals of ERC-20 tokens (the primary standard for tokens on the Ethereum network) will be suspended and other precautionary measures will be taken to guard assets against risks arising from London.
You can read more about Huobi’s management of the London Hard Fork Upgrade here.
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