The Ethereum network witnessed the deployment of its London upgrade on the Ropsten testnet on June 24. This upgrade consists of the highly anticipated Ethereum Improvement Proposal (EIP) 1559.
Following the launch on the Ropsten testnet, the London upgrade will be deployed on Ethereum’s Goerli, Rinkeby and Kovan testnets at weekly intervals. This is one of the important steps in the roadmap to implement a proof-of-stake (PoS) consensus on the Ethereum network, also known as Ethereum 2.0.
The London upgrade brings five EIPs that are going to be deployed on the testnets — EIP-1559, EIP-3198, EIP-3529, EIP-3541 and EIP-3554. The hotly debated EIP-1559 proposal is a transaction pricing mechanism that consists of a fixed per-block network fee that is burned and allows the dynamic expansion and contraction of block sizes to address the congestion issue.
Through this mechanism, there will be a discrete base fee for transactions that will be included in the next block. For applications and users who want to prioritize their transactions on the network, a tip called “priority fee” can be added to incentivize the miner for faster inclusion. While the miner pockets this tip, the base fee for the transaction is burned. This entails that until the transition to a PoS model is complete, in addition to the 2 Ether (ETH) per block that miners receive, they would also be receiving the tip for prioritizing transactions.
James Beck, director of communications and content at ConsenSys — a blockchain technology company backing Ethereum’s infrastructure — discussed with Cointelegraph the impact of burning the base fees on the network:
“Burning the base fee should put a deflationary pressure on the issuance of ETH, though modeling exactly how deflationary is difficult since you have to project variables like expected transactions, and, even harder to predict, expected network congestion. In theory, the more transactions that occur, the more deflationary pressure that the burning of the base fee will have on the overall Ethereum supply.”
However, Marie Tatibouet, chief marketing officer of cryptocurrency exchange Gate.io, spoke to Cointelegraph about the possibility of this change to the transaction fees having an adverse effect on the network.
She noted that one can still tip miners and that the larger the tip, the faster the transaction will be processed, adding, “Now, as the network gets bigger and with Ethereum continuing to be the primary smart contract platform, will that not trigger another ‘fees war’ among the users who are willing to pay extra to speed up their transactions?”
Difficulty bomb delayed
Another crucial part of this upgrade that impacts day-to-day users is the EIP-3554. This EIP delays the “difficulty bomb” to come into effect from the first week of December 2021. In essence, the difficulty bomb going off would mean that mining a new block would become extremely unfeasible and hard for a miner, thus enforcing the transition to the PoS Beacon Chain.
Kosala Hemachandra, founder and CEO of MyEtherWallet — an Ethereum-based wallet platform — told Cointelegraph the EIP has been there since the inception of Ethereum in order to ensure that the network moves to a PoS and Eth2 on time. He further added:
“This value is responsible for making the block difficulty exponentially hard after a certain block number, thus making it impossible for miners to mine new blocks, and they have to move to Eth2 network. However, because of development delays, this time bomb kept getting delayed, and in the London fork, it’ll be postponed one last time.”
The official document for this EIP states that the network is “targeting for the Shanghai upgrade and/or the Merge to occur before December 2021.” However, it also goes on to add that the bomb can be readjusted at that time or be removed altogether, indicating that the first week of December is not a hard…