August 15, 2021
Ethereum is the second largest cryptocurrency by market capitalization, and perhaps the most versatile. It is the home to the most important decentralized applications (dapps), non-fungible tokens (NFTs), and decentralized exchanges (DEXs) in the crypto ecosystem.
In the last few years, however, it has suffered because of this popularity. The initial developers of the network didn’t design it to handle the volume of transactions that it now executes. Thus, since the beginning of the DeFi boom, its transaction fees have gone up.
Developers have tried to tackle this issue in various ways, but their solutions are usually mid- to long-term. However, you can’t ask investors to sit and wait for them to be deployed.
There are alternatives to Ethereum, like the Binance Smart Chain, which also offers smart contract capabilities (paired with full EVM compatibility) and quickly gained traction. Its native coin, BNB, is currently ranked third on CoinMarketCap.
But Ethereum won’t go down without a fight. Ethereum 2.0, a fully upgraded version of the blockchain, has been launched.
What’s new in London?
London was introduced as a hard fork at block 12,965,000. It introduces 5 EIPs (Ethereum Improvement Proposals): EIP 1559, EIP 3198, EIP 3529, EIP 3541, and EIP 3554. The primary focus of these improvements is to reduce the fee size.
The star of the pack is EIP 1559. It reduces gas prices by changing the way they are calculated. Before London, users had to input the amount they wanted to pay. They could choose the gas fee they were willing to pay, and had to consider what other users were paying. EIP-1559 introduces a minimum transaction fee. This minimum network fee (base fee) fluctuates based on the number of transaction requests being handled by the network.
Now, users can choose between “fast”, “normal”, and “slow” bids for their transactions. Besides that, the network will split the total ethers mined daily into three groups and burn the transaction fees paid by the users, reducing the circulating supply and eventually raising the price. While this could affect miners, since they will earn fewer coins, it could be beneficial in the long term.
Moving on to EIP 3554 – this upgrade was introduced to delay the activation of the ‘difficulty bomb’. This protocol was to help the transition to a proof-of-stake (PoS) consensus system by rendering proof-of-work (PoW) ineffective. However, since the network is not yet ready for PoS mining, the fuse of the bomb has been lengthened.
This has been done before, in the Metropolis, Constantinople, and Muir Glacier upgrades, but on this occasion the delay time was way shorter. PoW mining, according to this upgrade, won’t be around after December 2021. However, there are still four months left for developers to retract and delay the difficulty bomb again.
Has London affected Ethereum’s stats?
Over a week has passed since the implementation of London and we can already see the impact it has had on the network. The most noticeable change is the price increase: from August 4 to August 11 the price of ETH has gone up by 28%, from around $2,500 to $3,200.
The average fee price, according to YCharts, has not been impacted so positively. On August 4, the average fee was around $8.50. After the upgrade it went down to $2.80, on August 6 and 7, but rose back to $6 on August 10.
The ratio of burned coins, in this first week after the implementation, is still lower than the inflation rate, so the reduced supply is not yet noticeable in the price. We’ll have to wait for six to ten months to see the real impact. Moreover, the deployment of PoS, if it takes place in December, will have an additional impact on the price.
How will Kirobo be affected by the London upgrade?
Kirobo is a platform based on Ethereum, so it will benefit directly from the London upgrade. The reduced gas fee is beneficial to all Kirobo users, since transactions will cost even less.
It is important to note that trading supported tokens with the Kirobo P2P Swap Button is already cheaper than with other platforms because users only pay a gas fee – there are no additional costs.
In addition, it allows users to decide when to execute their swaps, so they can further reduce costs by choosing to trade at off-peak times when gas fees are low.
Ethereum’s London upgrade seems to herald a bright future for the blockchain, improving scalability and prices. And if this comes to pass, the improvements will be passed directly on to the users of Ethereum-based applications.
Disclaimer: The article is not investment advice and must be used for informational purposes only. It is very important to do your own analysis.
Citizens of Israel, Canada and the USA cannot participate in the purchase of KIRO.