What is Ethereum London hard fork and how does it work? Table of Contents
How Ethereum London hard fork affects you?
What is the Ethereum London hard fork and how does it affect you?
After this spring’s “Berlin” update, “London” will be the next big update. The London hard fork will launch at block 12,965,000, which is expected to occur throughout the week. Here we tell you everything you need to know about the “London” update.
What is updated with Ethereum London hard fork?
Ethereum’s London update comes with many improvements.
The London hard fork is preparing the Ethereum network to make the move to Ethereum 2.0 next year. The big difference from the current version is that Ethereum 2.0 will work under Proof of Stake (PoS) and will leave behind the Proof of Work (PoW) consensus algorithm. While the PoW requires a mining process, the PoS consensus does not. PoS consists of a set of governance standards for consensus on a blockchain network that is expected to be more energy efficient than the current Proof of Work (PoW) algorithm. Thus, the objective in the short and medium-term is to leave mining for Ethereum behind.
This is where the London hard fork comes in. This update is based on a series of Ethereum Improvement Proposals (EIP) that affect the mining industry. This is why these changes to the network have been controversial, as they make ETH mining less profitable.
EIP-1559 is one of the improvements included that has generated the most debate in this regard since it changes the way in which transaction fees are calculated. Until now, miners set their own rates. From this update, the fees will be calculated by an algorithm, making the costs per transaction more predictable and transparent. These new commission rates replace gas commissions that miners had charged in the past through prioritization processes, similar to auctions.
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ETH transaction fees will replace gas fees
Tim Beiko, one of the Ethereum developers, explained in an interview that although the price change is notable, he does not expect a large reduction in it. To prioritize transactions, network users can pay miners an optional tip. A part of the transaction fees will be destroyed in order to make the network more efficient.
Another change for Ethereum miners is the suspension of gas refunds. What started as an idea to reduce unnecessary smart contracts and free up space, in practice its use offset part of the cost of mining but still congested the network. According to Beiko, eliminating gas rebates will make the network more stable.
If you want more details or technical information about the London hard fork, we recommend that you visit Beiko’s blog, since he has been very involved in this update.
How this Ethereum update affects you?
The London update will bring many changes, especially to miners, who also have to face the change to Proof of Stake (PoS). However, users won’t notice a big change at first. If we see this update as one more step on the way to Ethereum 2.0, this improvement will be a new milestone to improve the network, to make it more efficient and sustainable. It is believed that the technological improvements included in the face of Ethereum 2.0 will make the network more popular and increase its use.
Shortly before the price drop of the entire crypto market, ETH hit its all-time high. In fact, during the last 30 days, the price has risen by about 25%. The Berlin hard fork gave a notable boost to the price in April, which is why the recent rise is believed to be due to this new London update. The hard fork may affect the profitability of miners, as they now need to readjust their business model. However, investors and developers, in general, are in favor of this update, as they see less and less time for the launch of Ethereum 2.0.
If you are a Bitpanda user and you have ETH in your portfolio or any other ERC20 token, don’t worry, Bitpanda will take care of the migration. In order to process the hard fork, Bitpanda will have to disable deposits and withdrawals during the update. Trading will not be affected.
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April 24, 2024
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