What is Ethereum’s London Hard Fork update & how will it impact investors?

MUMBAI: The second largest cryptocurrency across the globe, Ethereum, on Thursday underwent a much-awaited update called 'London Hard Fork'.

The update took place a few hours ago in London and is expected to further revolutionise the Ether blockchain. Despite the delay in the launch, industry experts are describing the transformation as completely renovating your house while continuing to live in it.

But, the arrival of Ethereum 2.0 isn’t without controversy.

The biggest benefit of the new update is that it should enable the network to handle many more transactions per second. There are also hopes that this added scalability will tackle high gas fees.

What is London Hard Fork?
The London Hard Fork are a set of five Ethereum improvement proposals (EIPs). EIP-1559, included in the London Hard Fork, aims to change speed and incentivisation of Ethereum mining.

There is no limit on Ethereum count as it is an inflationary cryptocurrency. Miners are rewarded with brand new coins every time they validate a block. They are compensated with the transaction fees that are paid by users.

Once the update is rolled out, miners will no longer receive income from transaction fees. This will reduce the supply and give Ethereum a much-needed boost. It would make transaction fees more predictable for those, who use this blockchain.

The upgrade will ensure that no amount of network congestion results in shooting up Ethereum gas price. This step of price transparency will single-handedly help increase the adoption of decentralised applications.

Ethereum Foundation developer Tim Beiko has stressed that Ether owners, who use crypto exchanges, web wallets, mobile wallets or hardware wallets won’t be affected by the London Hard Fork.

What do experts say?
Nischal Shetty, CEO at WazirX, called it one of the most important days for the Ethereum blockchain community, researchers and engineers.

"EIP 1559 aims to turn Ether into a deflationary asset. The technology design of the upgrade will reduce the volatility of transaction fees, which has been a pain point for developers building on top of Ethereum and people transacting on it," he said.

Edul Patel, CEO & Co-founder of Mudrex, said the update is a giant leap towards Ethereum 2.0 that is expected by the end of this year. The London Hard Fork upgrade will pave the way for transition to next generation Ethereum.

"Ethereum is at the heart of the blockchain revolution. Several projects are currently being built on the Ethereum network," he said. "Several developers face the problem of the high transaction cost of Ethereum. Once this upgrade kicks in, the transaction costs would come down."

For the common investor, the long-term impact of this upgrade is mammoth, as once the cost of Ethereum blockchain comes down, the adoption and demand will continue to rise, which would ultimately push the price of the token higher.

Dan Finlay, co-founder and developer on MetaMask by ConsenSys, said from the protocol level to the user-facing wallet, there are a number of changes that can benefit users and developers on Ethereum.

"It reforms Ethereum’s fee market mechanism, and is a key change in this network upgrade. One of the main benefits of this update is more transparency around gas fees. Wallets will have better gas fee estimates, which makes transaction fees more predictable."