August 4 sees the long-awaited London hard fork activated on the Ethereum blockchain. This is a significant upgrade that will improve the efficiency of transactions on the network, at least until Ethereum 2.0 (known as “Serenity”) is fully deployed in 2022.
The Ethereum London hard fork will introduce a deflationary model for Ether (ETH) – where half of the transaction fees will be burned. However, this isn’t too exciting for miners since it means a reduction in transaction fees paid to them.
Below is a quick summary of the five Ethereum Improvement Proposals (EIPs) included on the London hard fork:
- EIP-1559: Change in Ethereum fee structure
- EIP-3198: Improve the user experience of smart contracts
- EIP-3529: Reduce refunds that had no impact
- EIP-3541: Make future updates easier
- EIP-3554: Make it easier to migrate to ETH 2.0 PoW to PoS
What ETH Token Holders Need to Know
If you’re holding ETH, then it won’t affect you too much.
All major exchanges are supporting the ETH hard fork. It seems uncertain at this time if a new coin will be created as part of the fork (as it was when BTC hard forked into BCH). There seem to be two scenarios:
- No new coin is created – everything will resume as normal.
- A new coin is created – the exchanges will elect to choose the chain with the stronger hashrate and then create a 1:1 ratio distribution of your ETH holdings from the snapshot date of the fork.
If scenario 2) happens, then it could be likely you’ll end up with two ETH coin holdings that both have “value”. But it’s more likely that one of them might become useless and its dollar value will crash to zero.
You no longer need to select GAS price for transactions fees (it will be set automatically).
EIP-1559 will change the current transaction fee structure to a “base fee” for each block. This means there will be a fixed price for transactions so users don’t need to be pricing gas fees in order to increase the chances of having their transactions confirmed earlier. The blockchain will burn the fee, reducing the overall supply of Ether (ETH). This effect will create deflationary pressure on the cryptocurrency.
ETH deposits and withdrawals on exchanges will be paused until the upgrade is completed.
Binance will suspend ETH and ERC-20 tokens deposits and withdrawals at approximately 9:30pm AEST on August 5, 2021. Please ensure that you leave sufficient time for your ETH and ERC-20 tokens transfers to be fully processed prior to the above time. We will handle all technical requirements for users holding ETH and ERC-20 tokens on Binance. More information on specific trading markets affected here.
Some GAS tokens will now be useless and staking users may be refunded.
Among those assets affected by the hard fork will be Ethereum’s gas token GST2 and its improved version developed by the 1INCH team – CHI. Those gas tokens “will become useless after London”. Projects such as 1INCH that are using those gas tokens are implementing refunds to their communities.
This is a temporary upgrade until ETH 2.0 is released.
The PoS transition of Ethereum 2.0 is planned for 2022, so the implementation of the London hard fork is still time-limited and temporary. Developers are working on scaling up the ethereum network by adding more side networks and linking them. Ethereum insiders hope this will reduce congestion and transaction costs.
Ethereum Community Reaction to Ethereum 2.0
It’s evident that Ethereum users are optimistic about Ethereum 2.0, judging by the rapid increase in the number of coins staked on the deposit contract. At the time of writing, 6,681,276 ETH had been staked so far, equivalent to US$16.6 billion.
In anticipation of the upcoming upgrade on the network, Ethereum whales are increasingly accumulating ETH:
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