Running a decentralized network is difficult. Due to the lack of a single point of contact, entire communities are involved in the update process.
This brings us back to the Ethereum blockchain. The blockchain is undergoing a major shift right now. It is transitioning from an energy-intensive proof-of-work algorithm (such as Bitcoin’s) to a proof-of-stake method.
Although it is already greatly delayed, Ethereum’s transition is best described as thoroughly upgrading your house while continuing to live in it.
The ETH community is generally supportive of the PoS transition. Not because it will allow the network to handle many more transactions per second. There’s also a chance that enhanced scalability will aid in the fight against rising gas prices.
However, as you might expect, the arrival of Ethereum 2.0 is not without controversy. Other improvements to the current PoW blockchain are being made as its delivery date is near. But some blockchain developer and critics aren’t happy with what they’re seeing. Obtaining a blockchain certification will undoubtedly provide you with a competitive advantage in the employment market.
But what exactly is the London Hard Fork?
A hard fork, also known as the Ethereum Improvement Protocol 1559 (EIP-1559), is an unchangeable permanent modification to the blockchain. The name of the update is preceded by London because the community tends to name updates after locations where Devcon international developer’s conferences have been held.
The change is remarkable for being a backward-incompatible upgrade. This means that you’ll need to download London if you want to stay connected to the Ethereum network after the protocol is implemented.
This upgrade protocol’s primary goal is to provide network users with a predictable and transparent transaction fee structure. Prior to this modification, the gas price for each block was established via a blind auction (the fee, or pricing value, required to successfully transact or execute contracts on Ethereum). Customers had to plan for and pay far higher transaction or gas fees to be included in the following block of transactions under these first-price auctions. As a result, transaction prices increased during busy hours and decreased during calm periods.
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The blockchain community’s protocol will now determine the transaction fee algorithmically and automatically, based on current demand-supply trends. This will minimize inconsistencies in price rises across the network and bring uniformity. It will also create much-needed deflationary pressure on the coin, as less supply means higher pricing.
Miners used to have complete control over the process, from fee determination to transaction execution. Users can now tip these miners in exchange for faster transactions. Only this tip, not the predetermined base charge, will be delivered to miners.
The London hard fork ushers in massive changes for the world’s second-largest cryptocurrency ecosystem. By burning or destroying ether coins, increasing the value of those that remain, and resolving current transaction fee difficulties. The EIP-1559, on the other hand, will boost block capacity, allowing network transactions to be faster and easier while also handling variation better.
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What does the new update do?
This update also heralds a significant forthcoming change in the blockchain’s core structure. It will now shift from a PoW (Proof of Work) model to a PoS (Proof of Stake) model amid concerns about the blockchain’s long-term health and sustainability.
While PoW focuses on solving complex mathematical puzzles with massive amounts of electricity, expensive mining infrastructure, limited scalability, and slow transaction processing. PoS does the same thing with less energy and allows users to support a cryptocurrency by creating a block of the same on the blockchain.
Some argue that miners will be obsolete in a few years. While they can continue to sell processing power to the network in the hopes of earning new ether, the money flow from the transaction will be drastically diminished.
EIP-1559, which is included in the London hard fork, seeks to modify this. Transaction fees will no longer be paid to miners once implemented. Instead, they will be delivered directly to the network to be burned. This could result in a decrease in the circulating supply of Ether over time, potentially raising the value of ETH.
How is the community reacting to it?
This has certain advantages. One of them is that it should make transaction fees for Ethereum blockchain users a little bit more predictable. The network congestion we’ve seen has aroused great outrage. This has been exacerbated by the triple threat of a bull market, the growth of NFTs, and the burgeoning DeFi industry.
However, it’s natural that some miners are upset about the potential of losing a large source of money. Especially given that the 2 ETH they receive as a block reward these days is significantly less than the 5 ETH they received a few years ago.
Some miners are reacting well to these modifications. Users will still be able to tip to boost the likelihood that their transactions will be completed on time. Furthermore, efforts to make Ether deflationary should result in miners’ leftover ETH being valued more in the long run.
Miners play an important role in the Ethereum ecosystem. They are in charge of both maintaining the blockchain and validating transactions. In contrast, the switch to proof-of-stake will virtually eradicate them. This is because validators have a vested financial interest in the network’s security.
Although nothing precludes miners from becoming validators, one minor concern is that many of them will have expensive equipment that is suddenly rendered ineffective.
Wrapping up
The next important milestone is termed “the merge.” It will allow the Ethereum mainnet to connect to the already-operational Beacon Chain allowing staking over the whole network. It has been reported that Eth2 experts are looking for ways to accelerate this process, which implies it could happen sooner than expected.
Then there will be shard chains, which will expand Ethereum’s capacity to conduct transactions and store data. Enroll in a blockchain course to learn about the intricacies of this amazing technology.
