Ethereum is the second most used blockchain network in the world, second only to Bitcoin. Today marked a significant milestone in its development. The ‘London’ hard fork, as Thursday’s major upgrade is called, is part of a more extensive set of enhancements leading to Ethereum 2.0 that will effectively see the network undergo massive changes like changing from a Proof of Work model to Proof of Stake.
Arguably the most important aspect of the London hard fork is one of the five Ethereum Improvement Proposals (EIPs) that went live: EIP-1559. This protocol introduces transaction fee ‘burning’ to the Ethereum network. Before the update, each Ethereum transaction was accompanied by an additional sum in the form of a bid for miners to process it. This bid – known as the ‘gas’ fee – was made in small sub-units of the Ethereum network’s native cryptocurrency, ether, called gwei (1 gwei = 0.000000001 ether). The sender had to set a fee based on willingness to pay for space in the block of finalised transactions. Naturally, when the network is very busy, gas prices increase substantially due to competition for the miners’ processing services.
EIP-1559 changes this model completely by introducing a base fee (BASEFEE). This simply represents the minimum fee needed to be paid so that a transaction can be included in a block. The fee fluctuates depending on market congestion. The capacity of the network has been doubled, from a maximum of 12.5 million gas limit per block up to 25 million. There still remains the possibility to ’tip’ the miners to make a transaction more urgent, but this is optional. The base fee is destroyed or ‘burnt’ upon completion of the transaction.
The London hard fork changes a lot for Ethereum and for blockchain in general. Beyond the involved technical details of how the network is becoming more efficient and scalable, the world’s second most popular blockchain has undergone a massive upgrade to its core system without so much as a hiccup. Within the first 24 hours, 4,700 ETH was burned (c. USD 13 million). The vast majority of dApps (Decentralised Applications), most of the DeFi ecosystem, and many other payment systems and platforms are built on Ethereum. The fact that the network upgrade went by seamlessly is very encouraging for digital assets, as it proves yet again that the technology behind the hype is strong, tenable and increasingly mature.