The Ethereum network has been lately undergoing improvements geared towards scalability and affordability. The latest improvement in the works is the Ethereum London Hard Fork which has already undergone three testnets this month. Although the London Hard fork succeeding the Berlin Hard fork is only temporary and will herald Ethereum 2.0 billed to be fully launched by the second quarter of 2022.
The Ethereum London Hard Fork will incorporate two changes into the network pending the launch of Ethereum 2.0 which according to reports will operate on a Proof-of-Stake consensus algorithm. Currently, Ethereum 1.0 operates on the Proof-of-Work algorithm where miners have to process and confirm transactions. Proof-of-Stake algorithm processes transactions via validators who have either provided liquidity in pools or staked. London Hard fork will witness two improvement proposals.
EIPs 1559 and 3238 To be Implemented
Ethereum Improvement Proposals (EIP) 1559 and EIP 3238 are a bulk of what the Hard fork entails. EIP 1559 is a proposal for a pricing mechanism that would reduce gas fees to the barest minimum via what is regarded as a base fee. Here, users on the network would not have to fix the base fee themselves; the fee is fixed by the protocol and miners are rewarded with the tip that users may add to the base fee in order to fast track their transactions or push it to the front of the queue. The base fee is then burned via what is known as deflationary mechanism.
However, the base fee may be subject to some sort of fluctuation even as it is determined by the network’s protocol itself, depending on the network activity at any point. So the burning reduces the cumulative supply of Ethereum though not fixed and might as well have an uptick effect on the price of the second most popular crypto asset after Bitcoin. EIP 3238 would make mining on the network more difficult, hence the name given to the proposal– mining difficulty time bomb. Miners will be unable to mine thereby forcing them to adopt the Proof-of-Stake algorithm as soon as it is launched on the second version of Ethereum.
Some members of the Ethereum community have complained about the EIP 3238 saying it would deprive miners from earning as they process transactions. Other improvements that would ensue with the temporary hard fork are EIPs 3198, 3529, 3541, 3554.
NFTs Contribute to Increased Network Activity
All of these scheduled improvements are long overdue as the Ethereum network has been inundated with high gas fees and scalability issues for a long time. Users have been complaining bitterly about paying gas fees higher than the actual transaction itself. A case in point is a $131 transaction that was processed this month for which the gas fee was $2.6 million. The non-fungible tokens (NFTs) hype as well contributed to the increase in network activity. The Hard fork hopes to make each block on the network accommodate only 50% of transactions processed unlike before.
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