- Ethereum’s London hard fork marks the first major move to shift the Ethereum blockchain to a more energy-efficient proof-of-stake mechanism
- Major coup for Ethereum to achieve the consensus needed to make blockchain changes is testimony to its durability and allows for more use cases to be developed
EIP 1559 – never has so much ridden on an innocuous Ethereum Improvement Proposal.
Dubbed the “London hard fork,” EIP 1559 represents the start of a major shift in the Ethereum blockchain to a proof-of-stake protocol that could potentially put to rest allegations that cryptocurrencies (or at least Ethereum) consume large amounts of electricity.
EIP 1559 is estimated to have already eliminated some US$2 million worth of fees on Ethereum, based on data from ultrasound.money
Cryptocurrencies have long attracted criticism, the most vocal of which has been from Elon Musk, for using a proof-of-work system that requires computers to run round the clock to solve complex mathematical puzzles to secure the underlying blockchain and receive that blockchain’s cryptocurrency as a reward for the electricity and computing power spent.
And while software developers working on Ethereum have spent years to transition to a proof-of-stake system which essentially allows holders of Ether to “stake” their Ether to secure the Ethereum blockchain, that shift has been marred by developmental delays and achieving consensus.
It is that achievement of consensus which represents a major success for Ethereum.
With other cryptocurrencies like Bitcoin, even something as seemingly trivial as increasing the block size can result in bitter debates between developers and cause hard forks, where a new blockchain that resists the change could be formed.
Ethereum’s shift to proof-of-stake is a combination of several factors, but not least among which is its widespread use – being the world’s most heavily used blockchain – and sufficient distribution of stakers, with enough concentration to wrought consensus to make these changes.
ETH 2.0, which will see Ethereum finally transition to proof-of-stake, will be expected to occur sometime in early 2022 and excitement about the shift has seen bullish sentiment on Ether push the cryptocurrency up by almost 600% over the past year, while Bitcoin is up around 300%.
These gains in Ether come even after falling from recent all-time-highs in April, when the cryptocurrency was trading around US$4,000 (at time of writing Ether was trading around US$2,700).
From decentralized finance to non-fungible tokens, decentralized applications and demand for Ethereum has exploded over the past year.
Since the record-breaking US$69.3 million sale of Beeple’s NFT “Everydays: the First 5,000 Days,” demand for NFTs have been steadily growing with everyone from art galleries to fashion houses offering digital tokens minted on the Ethereum blockchain.
EIP – 1559 will also fundamentally change the emission schedule for Ether as well, from one that is mildly inflationary, to one that is deflationary and closer to Bitcoin.
But that doesn’t mean higher fees for transactions and if nothing else, should bring down fees for using the Ethereum blockchain, while simultaneously helping increase the value of Ether.
In Ethereum’s initial 2013 whitepaper, a cap for Ether was originally envisaged, but given the dynamic nature of cryptocurrency development, that “cap” was later shifted into a dynamic policy that would adapt to the specific circumstances.
Ethereum’s block size is also now variable and that should also help transaction speed.
Previously, the amount of transactions that could be jammed into a block was fixed, meaning that users sometimes had to wait for their transaction to clear when demand was high.
Blocks now behave like accordions, expanding and contracting according to incoming transactions.