If your wondering why Ethereum has spiked in the last 24 hours it’s because the cryptocurrency just activated their London hard fork.
A hard fork by definition is “a new software update implemented by a blockchain or cryptocurrency’s network nodes that is incompatible with the existing blockchain protocol, causing a permanent split into two separate networks that run in parallel”.
So now that you got the definition of hard fork down, what changes does the London hard fork bring to the table?
Well to start off Ethereum’s EIP (Ethereum Improvement Protocol) 1559’s main goal is to make the cost of using Ethereum more predictable.
The new update will also now bring a deflationary characteristic to Ethereum as the cryptocurrency will now be burned instead of giving to miners.
Many holders believe the burn will drive up the price (theoretically the burn fees must be more then the amount of new issuance minted in order to see value increased) whereas miners are not as excited about the update due to the fact they want make as much money anymore.
Congratulations to the #ethereum community for the successful activation of the London Hardfork. It's a very significant step towards the agenda of Proof of Stake and great for the industry and environment: https://t.co/IZ8XE2ut7D
— Charles Hoskinson (@IOHK_Charles) August 5, 2021
— CoinDesk (@CoinDesk) August 5, 2021
CNBC had more on the story:
Ethereum’s much-hyped and somewhat controversial “London” hard fork has just activated.
So far, news of the successful upgrade has coincided with a runup in the price of ether, the native token of ethereum’s blockchain. The cryptocurrency is at $2,620, up 3.9% in the last 24 hours.
“It adds a lot of complexity to the fee logic, but it’s an interesting approach that could potentially stabilize the fee dynamics,” said Nic Carter, Castle Island Ventures general partner and Coin Metrics co-founder.
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.
Before the upgrade, users would essentially participate in an open auction every block, where they would have to place a bid with a miner in something referred to as a “first-price auction.” The closed-bid setting meant that users were often taking a stab in the dark when proposing transaction fees (known as “gas prices”), picking a number that they felt would guarantee their inclusion in the next block of transactions.
“Fifteen-fifty-nine is really meant to create an ecosystem that encourages lower gas fees,” said Auston Bunsen, co-founder and CTO of QuikNode, which provides blockchain infrastructure to developers and companies.
Ethereum's London hard fork has activated at block 12,965,000 and EIP-1559 is now active.
Huge thanks to everyone involved for their hard work!
Onto the merge.
— eric.eth (@econoar) August 5, 2021
— Binance (@binance) August 5, 2021
Forbes got the scoop too:
In less than two hours Thursday morning, ether prices spiked 6% to a nearly three-month high above $2,800 after the London upgrade, which overhaul’s ethereum’s fee structure to make transaction costs easier to predict and less expensive, went live shortly after 8:30 a.m. EDT.
Though miners, who run power-intensive algorithms to verify cryptocurrency transactions on behalf of users, should expect revenue to drop as much as 50%, the new upgrade marks a major step in ether’s push to become more environmentally friendly by requiring less work from miners.
The surge boosted ether’s market capitalization above $325 billion and lifted year-to-date gains to more than 280%—far higher than market-leader bitcoin’s 33% increase.”
Ethereum has been outperforming Bitcoin for about two years, and we expect more of the same,” Mike McGlone, a senior commodity strategist at Bloomberg Intelligence, wrote in a Wednesday note, citing the upgrade and the cryptocurrency’s booming adoption as catalysts for continued growth.
#Ethereum Burn Update
Current Basefee: 35.5
Total burnt $ETH: 3197.06 ETH
Total burnt $ETHUSD: $8,895,979
— Burned Ether (@BurnedEth) August 6, 2021
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