Ethereum London Update 101: Must Knows
Just right after the Berlin upgrade announcement in April, Ethereum announced the deployment of the London upgrade for June 24th. This is supposed to be the cooler one. Why? Because for starters, it would help facilitate Ethereum’s full transition from Proof-of-Work to a Proof-of-Stake (PoS) consensus mechanism.
Typically, this major upgrade will have a huge impact on Ethereum — and the surrounding crypto community.
Having already launched on the Ropsten and Goerli testnets, the London upgrade is also set to be deployed on Rinkeby and Kovan testnets in the coming weeks. This may be the reason the price of ETH hit a 2-week high since the last dip.
Wondering why there’s so much hype around this new upgrade? Well the hype seems kinda worth it. While the London hard fork prepares users on the network for the Ethereum 2.0 (Serenity) release, it also makes notable changes to the transaction fee system on the network. The upgrade includes 5 Ethereum Improvement Proposals (EIPs) that introduces a new transaction fee structure. Sounds too technical? Stay with us.
High gas fees have always been a challenge with the Ethereum blockchain. Users especially in cases of small transactions had to pay exorbitant prices in gas fees. This favored whales who could afford such costly fees, leaving out the smaller minnows. If you’ve ever traded on Ethereum dapps, this should be something you’re definitely familiar with. You don’t wanna pay through your nose for a simple small transaction. The London upgrade aims to fix that
One of the newly introduced EIPs, EIP-1559 (fee market change), proposes an entirely new transaction pricing mechanism that allocates a fixed fee per block. Instead of bidding on gas prices as it currently stands, the network will set a base fee for each block to make the transaction speed equal for all users. Ethereum blockchain will burn the fees which in turn reduces the overall supply of ETH (burn baby, burn!).
Although you should note that, if you still want your transactions prioritized on the network, you can incentivize miners by giving a tip called priority fee.
In a bid to also get PoW miners and users to transition to the PoS mechanism, the London upgrade includes the EIP-3554 (Ethereum Difficulty Bomb) which has been delayed till December. This proposes to make mining on the current Ethereum blockchain much more difficult, time consuming and expensive. This will force users to make the necessary transition to ETH 2.0 that is undoubtedly much more environmentally friendly. The old mode is getting stale, everyone’s gotta hop on the upgrade.
The current Ethereum mechanism is plagued with high gas fees. If you need your transaction processed faster, you often have to pay more gas fees to be made priority.
However, this new upgrade gives you equal access, where you don’t have to pay more for transactions to be validated. The base fee is fixed per block and that is what you pay at the time you submit the transaction. This should also prevent transactions from getting stuck as ETH 2.0 rolls out with larger scalability.
If all testnets launch successfully, we could be seeing the mainnet launch of the London upgrade later in August.
Reduction in transaction fees is one of the main highlights of this upgrade and we look forward to seeing how this is actually implemented. There’s tons more in terms of other upgrade features, so stay tuned for our coverage on Ethereum 2.0 news!