When the clock struck 12:34 a.m. UTC on Block 12,965,000, Ethereum's most recent hard fork update, codenamed "London" upgrade, became officially active on the network.
This latest backwards-incompatible hard fork also marked the introduction of five additional Ethereum Improvement Proposals (EIPs), which were implemented simultaneously.
The Ethereum Improvement Projects (EIPs) 1559, 3554, 3529, 3198, and 3541 are a group of code enhancements aimed at improving the Ethereum network's user experience and value proposition. They are available on GitHub.
It's fair to assume that the London hard fork has garnered more media attention than prior upgrades because it's located in London. The rise of cryptocurrency markets in recent months has served to elevate Ethereum to the forefront of the news cycle, and investors are paying close attention to the possible impact that the new EIPs could have on the network as a whole.
Specifically, according to Christine Kim of CoinDesk, EIP 1559 will replace "Ethereum's traditional auction-style fee market with an algorithm that determines the gas price on the fly." According to a study from Kim, the idea has four major objectives, including counterbalancing the increasing supply of ether, avoiding economic abstraction of ether, lowering fee volatility, and boosting the efficiency of the fee market.
It is anticipated that EIP 1559 will have an impact on all stakeholders in the Ethereum network to varying degrees. Users of the network will now have access to a new fee market, which will alter the way their transactions are prioritized and will increase the predictability of transaction fees for them.
Increased block size variance will also be introduced by EIP 1559, which means that block sizes will be able to fluctuate up to two times the present maximum limit during periods of significant network congestion.
It is expected that this flexibility in the amount of transaction data that may be contained in a block will increase fee market efficiency while also alleviating some of the pain points caused by Ethereum's low transaction throughput, which refers to how quickly the network can verify transactions.
The change that EIP 1559 introduces that has generated the most discussion is the one that affects miner rewards. In exchange for reduced transaction fees (known as gas prices), miners will become increasingly dependent on block rewards, transaction tips, and potentially "maximum extractable value" (MEV) for rewards as a result of the upgrade.
In the end, long-term investors will witness an update to ether's emission timetable, as well as enforcement of ether's use case as a method of paying for block space.
Things to keep an eye on including the possibility of a chain split.
Even though Ethereum’s London hard fork is exhilarating, it also entails risks and involves venturing into unfamiliar territory.
Backward incompatible upgrades rely on the many distributed computers, commonly known as "nodes," linked to the Ethereum network to upgrade their software at the same moment. If a significant number of nodes operated by exchanges, miners, and other network stakeholders do not upgrade, a chain split and disruption of block generation on the Ethereum network may result.
The Ropsten testnet was experiencing problems when a miner using the most popular Ethereum software client, Geth, authorized an incorrect transaction. This caused a brief chain split, which was resolved by a different miner utilizing the London hard fork.
A collaborative effort between Ethereum developers and customers has ensured that an issue of that nature will not be repeated on the main network in the future. Forkmon, for example, is a node monitoring service that allows users to keep track of the current state of the Ethereum blockchain in real-time and discover chain splits as they occur.
MEV and front-running
The act of "burning" the base transaction fee removes revenue from Ethereum miners that was previously theirs. Miners will have to rely on increasing ether pricing or greater value extraction through MEV in order to make up for the revenue they've lost in the process.
Users on decentralized exchanges have been "front-run" on trades, transactions have been revoked, and transaction fees have increased as a result of the frequent reordering of transactions due to MEV. Through the Flashbots Dashboard, you can keep track of how the value of the total MEV harvested on Ethereum is changing over time.
Fee market performance
It will also be vital to monitor how effective the new Ethereum fee market is in bringing predictability to transaction fee projections and how much of the total ether supply is burned through base fees in the coming months. Watch The Burn, for example, allows you to keep track of where your money is going.
The Ethereum hard fork in London is a part of the Ethereum 2.0 roadmap, which can be seen here. This calls for the present proof-of-work protocol to be replaced with a proof-of-stake alternative that is both more efficient and easier to use than the current protocol. That means that the 4th of August will bring us all one step closer to the launch of ETH 2.0.
After the Ethereum 2.0 upgrade, what could happen?
It is projected that the price of Ether would rise as a result of the deflationary effect of the update, which cuts transaction costs.
Although some investors foresee a decline in the market in the near future. We may expect to see a multi-day/week correction following today's fall. One of the most popular forecasting blogs for the crypto and stock markets claims that "I hope I'm wrong," according to Investing Angles.
The EIP-3554 is another critical component of this upgrade that has a direct impact on the daily lives of its consumers. The "difficulty bomb" will not go into effect until the first week of December 2021 as a result of this EIP's implementation delay.
EthHub.io co-founder Anthony Sassano estimates that 23% of all ETH mined is held in smart contracts. Over 23.45 million ETH tokens, valued at nearly $50 billion, make up this percentage.
As the most extensively utilized network for decentralized finance (DeFi), the Eth2 deposit contract has about 6 million ETH invested in it and 9 million ETH in multiple DeFi protocols.