The highly anticipated London update of Ethereum (ETH) has arrived, bringing with it the renewal of the network’s monetary system through the Improvement Proposal of Ethereum, or EIP, 1559.
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The price of the second-largest crypto asset by market cap rose 14% in the last week prior to this update. At 12:27 UTC, it was trading at USD 2,629. This is its highest price since the beginning of June.
It had hit its May record of nearly $ 4,357 (for Coinecko), down 40% since then.
Some major exchanges have decided to suspend deposits and withdrawals of ETH and ERC-20 tokens during the update period. Binance stated that this is done to reduce trading risks, caused by price volatility and to maintain the safety of users’ funds during the fork. Even the cryptocurrency exchange OKEx issued a similar statement. BitMEX announced that three BitMEX contracts and two BitMEX indices will be affected by the update and that these markets will be open during the fork.
Imagine Apple stock being burned
The London update follows the April Berlin update and includes five EIPs.
The most discussed in recent months is EIP-1559, and is accompanied by EIP-3198 and EIP-3529. Two other proposals included are EIP-3541 and EIP-3554, the first of which is intended to pave the way for larger improvements to the Ethereum Virtual Machine (EVM), and the second to delay the difficulty bomb, i.e. ‘ice Age.
As for the same EIP-1559, as reported in more detail, offers an automatic token burn mechanism for each transaction and is expected to help improve the commission market.
It should allow for better estimation of transaction fees and allow for more reliable transaction inclusion, as well as at least moderately reducing ETH’s inflation rate, burning through transaction fees, among other points.
However, it will not lower gas prices in the long run, nor will it make ETH deflationary by default.
A great day for the Ethereum ecosystem
Ross Middleton, CFO of the DeversiFi exchange, called the update “a big day for the Ethereum cryptocurrency ecosystem”. He said that now every transaction, purchase of non-fungible tokens (NFT), or lending on the Ethereum network, will result in ETH being burned.
“The equivalent would be that Apple Inc you burn AAPL stock whenever someone buys something from the Apple App Store or makes an in-app purchase, ”Middleton said.
During the Bankless livestream, some key people in the Ethereum ecosystem confirmed that the update was done and continued to monitor the different aspects for possible problems.
Ethereum developer Trenton van Epps claimed that “Everything is burning ETH as expected.”
Participants noticed that nearly 3 ETH were burned in just 10 minutes. About 4 minutes later, it was over 8 ETH.
Hasu argued that the current burn rate won’t last forever.
Patience and warnings
Many of the changes made by this EIP and the update in general will not be visible overnight. In addition, a number of insiders, such as the CEO of MyCrypto Talyor Monahan, have warned users to lower their expectations and to be aware that there could be problems with the fork as well. For example, we encountered problems during the previous Berlin update.
Others have noticed that a number of problems and bugs can appear, but also that this particular EIP has been extensively tested.
Contributors to EIP-1559 have described EIP as “an incredibly complex change, the biggest change made to date on the Ethereum mainnet, which will improve both the user experience and the economy of the entire network.” They added that “the engineers, researchers and other contributors will not directly acquire any of the ultimate benefits for the network.”
At the time of writing, according to data from ethernodes.org, 77% of customers are ready to upgrade.
To be compatible with the London update, node operators will need to update the client version they are running.
Tim Beiko, the community manager of the Foundation Ethereum, wrote: “if you are using an Ethereum client which is not updated to the latest version […], your client will sync with the pre-fork blockchain once the update is done. You will be stuck on an incompatible chain following the old rules and will not be able to send Ether or operate on the post-update Ethereum network. “
Beiko reported that “it’s also worth noting that these crawler websites don’t have a complete view of the network, so the numbers could be misleading. They’re probably more or less correct, but I wouldn’t give too much weight to specific percentages.”
Regarding wallets, Eric Conner, co-author of EIP-1559, he has declared that MetaMask, for example, it can still work, even if it doesn’t support the new transaction fee path. He also added that “the [transazioni] legacy are still supported, not all wallets will flip over at the same time “.
However, MetaMask has confirmed that they are rolling out support for the update.
As for the much-discussed priority fee / tip, Beiko said that users “want to pay miners a high enough priority, that if they include their transaction, it’s clearly profitable for them,” providing additional math in the thread.
Furthermore, Hasu has tweeted the answers to two important questions posed within the crypto universe.
If the wallets are not ready for EIP-1559 from the start, the old transaction format remains compatible and the gas price is converted to the new format (maximum base fee + tip the user is willing to pay). He also said: “Be careful not to overpay for transactions.”
Furthermore, all transactions, including legacy ones, are handled according to the new format, so miners must burn ETH to include them.
In the meantime, this is just an update on a long path that is the unfolding of the second iteration of Ethereum, ETH 2.0. According to Joe Lubin, CEO of Consensys and co-founder of Ethereum, this iteration will be “a paradigm shift”.
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