Now, the crypto scene is gearing up for a much-anticipated upgrade; the London fork. With only a few hours left, according to the official site’s countdown, crypto enthusiasts across the globe are eagerly waiting to see what direction the markets take following this fork. And as is the case with any major crypto occurrence, the fork has been received with both enthusiasm and skepticism, even as ETH users prepare for Ethereum 2.0, set for 2022.
So, what’s it all about? And what changes on the mainnet should you expect? Keep reading or some insightful information on the fork.
What is the London Fork?
Before getting into the nitty-gritty details of the London fork, let’s first define what a fork in the blockchain world means.
A fork refers to technical upgrades or changes to a software’s protocols. Unlike in the traditional world, where software developers can simply release a new version, a blockchain’s users must first agree since there’s no central ownership.
Forks often occur when some members of the community aren’t satisfied with the chain’s functionalities. Depending on the outcome, they usually create a split and can either be hard or soft.
For a soft fork, the changes to the protocol make transaction blocks that were previously valid invalid. A majority of the users have to agree to upgrade to the new rules so that only one blockchain remains valid. The case is different for the hard fork, where all network nodes have to be in consensus. The upgrades cause a permanent split, resulting in two blockchains. The most notable example is the DAO fork that led to the creation of the Ethereum Classic.
The London fork falls under the latter category and is scheduled to go live on block 12,965,000. The fork is part of the blockchain’s journey to Ethereum 2.0, which will see the chain move from PoW to PoS protocol. The London fork upgrade is expected to bring about 5 EIPs that aim to tackle various inefficiencies within the blockchain. The most notable of these five are the EIP-1559 which will introduce a new fee structure to reduce inflation, and EIP-3554, which will delay the difficulty bomb to 1st December. The other three EIPs are:
Forks bring about so many changes, so it’s essential to stay in the loop. What should you expect? Here are five possible outcomes of the London hard fork.
More Predictable Gas Fees
The world’s second-largest crypto blockchain is notoriously known for its high gas fees. Over the last few months, Defi’s success has caused an even bigger strain on the blockchain, with the gas fees soaring through the roof when the network is busy. Developers argue that the current blind auction system is the reason behind the volatile prices.
EIP-1559 aims to correct this by introducing a base fee. Instead of having the users bid against each other, the network will determine a base fee that users will be able to see before they make any transactions. In cases where the fee is too high owing to how busy the network is, users can always wait till later to complete their transactions.
It is worth noting that the transaction fees won’t necessarily be cheaper but rather more predictable. As is the case with the gas fees now, the base fee will vary depending on how busy the network is, and users can expect a price spike when too many people are transacting.
Ether’s Value Could Go Up
One of the reasons behind the excitement over the London fork is that it could boost ether’s value. Under the new protocol, miners will not be receiving the base fee as a reward. Instead, the coins will go back to the network so they can be burned. As a result, ether’s overall supply will reduce over time, creating deflationary pressure on ETH. Its demand will then go up, especially considering it is the store of value or the decentralized economy. Thus, we can expect ETH’s value to rise in time.
Miners on the network are particularly divided on this front. On the one hand, some are vexed that they will not be receiving block rewards. On the other, users will still be able to pay tips. If Ethereum’s price goes up, the remaining tokens will be worth so much more.
However, it’s unclear how the fork will affect ether’s price since other factors are at play, including transaction volumes and the amount of ether burned.
Mining on Ethereum Network will be More Difficult
The London hard fork’s primary role is to pave the way for the move from ETH1.0 to ETH2.0. The EP-3554 will help achieve this goal by making it increasingly difficult to mine on the network. The difficulty upgrade is set for December 2021 and will make it less appealing to mine on the network, reducing the financial incentive.
The difficulty bomb is expected to freeze Proof of Work (PoW). Developers are keen to ensure that the ETH2.0 upgrade doesn’t result in the creation of another blockchain. Therefore, EP-3554 serves to nudge network users to transition to PoS.
Gas Tokens will Become Obsolete
EIP-3529 of the London upgrade will do away with gas refunds so that gas tokens become functionless on the network. Here’s how.
Developers introduced gas tokens, such as CHI and GST2, to the network to ensure lower prices, especially when deploying smart contracts. The tokens ensured that developers got a gas refund whenever they removed data that they had stored on the network.
With the London fork and EIP-3529 in particular, there will be no more gas refunds. In doing so, the Ethereum network will become more stable. Therefore, gas tokens will cease to function on the network and will have no actual utility. However, they may remain active on the markets, quite similarly to how the YFI token behaves.
The Shanghai Hard Fork
As we have mentioned earlier, the London hard fork is just a step on the roadmap to Ethereum 2.0. After successful completion, we can expect more upgrades to the network as we close in on ETH 2.0.
The next notable upgrade is the Shanghai fork, which will seek to merge the PoW mainnet with the already existing Beacon Chain, which uses PoS. Unlike previous hard forks, Shanghai won’t introduce any additional features and is, thus, considered one of the final steps to Eth 2.0.
Shanghai will foster the implementation of shards, which is Eth 2.0’s scaling solution. Although it’s not yet clear, the fork could become operational by the end of the year, especially after a community user proposed for the community to prioritize it following the London fork.
With only a few hours left, the crypto community is eagerly waiting to see the impact of the London fork. Critics and fans alike seem undecided over what direction Ether will take following the upgrade.
That said, the much anticipated London fork is an integral step in Ethereum’s roadmap, and it remains to be seen what role it will play in the successful transition to ETH 2.0.