Currently sitting at $2,013, the price of Ethereum has taken a dive from its all time high of $4,362, having dropped 55.79% in 2 months. Fed by the growth of the Decentralized Finance (DeFi) and Non-Fungible Token (NFT) industries, the rise of Ethereum’s use has led to the congestion of the network and to the rise of gas prices. So much so, that the network became impossible to use for a retail trader or dApp user.
Ethereum and Scalability
As Ethereum transactions and gas fee prices reached their peak in May, new competitors began to surface as cheaper solutions for both users and platforms to adopt. During the first quarter of 2021, Binance Smart Chain (BSC) proved to be Ethereum’s bigger competitor, especially when it came to DeFi applications.
While Ethereum is still the blockchain with the highest value locked in DeFi, the second quarter of 2021 has seen several DeFi and NFT applications move to other competitors like Polygon which surpassed Ethereum in terms of unique active wallets. This new multi-chain scenario is becoming an increasingly established reality in the crypto world, and the “dethroning” of Ethereum as the only considerable player in the DeFi and NFT space is something that is currently taking place, as data shows.
New developments Will Push Ethereum Forward
While Ethereum has surely fallen from its highest point, there is still a lot to come for the first-ever smart contract platform. The project has always been described as a work in progress and implementing scalability and sustainability solutions are certainly two of the main focuses for the developers working on the blockchain network.
This is why there is a lot of hope when it comes to the long-awaited London hard fork which is set to launch on block 12,965,000, estimated to be mined on August 4 between 13:00 UTC and 17:00 UTC. While the hard fork has been delayed before, testing has shown promise and has led to the final confirmation of the hard fork date, especially after successful results on the Ropsten and Goerli testnets.
While Ether has not shown major signs of recovery following the confirmation of the hard-fork, it is possible that traders are being cautious about the event. Technical difficulties may take place when it comes to the actual implementation of the fork and there may also be some negative ecosystem changes that will come along, even with successful implementation, such as a decrease in miner revenue.
What is the London Hard Fork?
The now confirmed London hard fork will bring along several changes that come in the form of Ethereum Improvement Proposals (EIPs). There are, however, two main changes that users and traders are anticipating the most and they are related with the mining and transactions fees on the Ethereum network.
EIP 1559 will change not only the fee structure in Ethereum but will also make Ether less inflationary as it will burn part of the transaction fees. This change is what may cause the aforementioned change in the mining ecosystem as it will decrease miner revenue. However, it may also spell bullish signs for cryptocurrency as it increases its scarcity.
EIP 3554 will delay what is known as the Ethereum difficulty bomb to December 1 in preparation for Ethereum’s move into a fully proof-of-stake cryptocurrency. The difficulty bomb serves to increase the difficulty in Ethereum mining to a point where it freezes proof-of-work mining, ensuring that there is no chance of fracturing and that every moves to Ethereum 2.0. Without the difficulty bomb, miners could stay on the PoW blockchain, creating two versions of Ethereum. This EIP is highly anticipated as the change was previously set to go off way too soon.
While these changes are in preparation to Ethereum’s move to its 2.0 version, it is possible that it will capture a positive move in the market and help Ethereum retain its position as the go-to platform for DeFi and NFT ecosystem.
Previous incidences of major changes in cryptocurrencies have taught us that prices jump after the event rather than in anticipation. Bitcoin has had many halvenings which have left the price unaltered in the build-up and at the time of the event. But afterward have catapulted the price tremendously.
It would be unreasonable to think that the London Fork would be any different for Ethereum in terms of price.