The Ethereum community is positively buzzing right now. We are on the verge of going through the London hard fork. The Ropstein Network aka the “Ethereum Testnet” has already incorporated the hard fork and the mainnet will deploy it any time now in the first week of July. This is significant because the London hard fork is the last major update before Ethereum transitions to Ethereum 2.0.
For the uninitiated, think of a hard fork as a system upgrade from which there is no going back. A “fork” in general is a system upgrade that could be “soft” or “hard.” To understand the difference, let’s use the example that Andreas Antonopolous used:
Think of a vegetarian restaurant. If this restaurant decides to add steaks to their menu, that will be a hard fork — a change in rules that makes the newer version of the restaurant utterly incompatible with the older version. However, if this restaurant decides to add vegan options, it will be a soft fork.
So, what changes are coming with the hard fork?
One of the most significant updates that the hard fork will bring is the EIP-1559 update. If you want to know more read our article.
Anyway, why is EIP-1559 needed? Let’s give you a quick overview.
Ethereum allows anyone to code and execute smart contracts. YAY!
However, the gas fees you pay to execute your smart contract are high. BOO!
Ethereum is the most popular smart contract development in the world. YAY!
This increased activity, unfortunately, leads to loads of congestion and increases the fees even more. BOO!
What EIP-1559 is going to do is that it will burn a significant portion of the gas fees to make the entire system a lot more affordable and efficient.
Along with EIP-1559, the London hard fork will also bring in the following three EIPs:
- EIP-3554: Difficulty Bomb Delay to December 2021
- EIP-3529: Reduction in Refunds
- EIP-3541: Reject new contracts starting with the 0xEF byte
- EIP-3198: BASE-FEE opcode
I want to focus more particularly on EIP-3554.
What is a “Difficulty Bomb?”
In any Proof-of-Work (PoW) mining protocol, there is a metric called “difficulty.” Basically, as more and more miners enter the network, to ensure that new blocks are produced at regular intervals, the bitcoin network purposefully makes mining more challenging by increasing the “difficulty” of the process.
Now, as you may know, one of the most crucial aspects of the Ethereum 2.0 update is the transition from PoW to proof-of-stake (PoS). In order to incentivize the miners to switch over, Ethereum will implement the difficulty bomb. The “bomb” is basically a piece of code that makes mining difficult to the point of being practically “unmineable.” As such, the miners will no longer have the economic incentive to continue mining and switch over to staking.
EIP-3554 will delay this difficulty bomb to December to give miners more time to wrap up their operations and prepare themselves for the transition.
Ethereum On-Chain Analysis
Over the last week, the Ethereum price dropped from $2,020 USD to $1,875 on June 25 and June 26. Following that, ETH jumped to $2,150 on July 1. However, the “age consumed” metric shows a significant spike, following which ETH dropped to $2,035. This means that one of the OG whales had sold off a portion of their tokens.
On the other hand, the miners continue to accumulate their ETH.
Over the last week, the miner balance had jumped from 19.91 million to 20.07 million. There is another chart that I want you to check.
The chart above shows you the amount of USD locked up in DeFi contracts.
More USD locked up = More network utility.
On June 25 and June 26, the Total Value Locked dropped from $51 billion to $46 billion. Since then, this value has jumped to $52.60 billion.
“Full steam ahead” seems to be the motto for Ethereum. The London hard fork will greatly impact how Ethereum functions for the rest of the year as the network readies itself for Ethereum 2.0.
Oh, and before I go, do you like Bitcoin? Do you like free Bitcoin? I sure do.
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