Ever since the Berlin update, Ethereum has been on the soar until the inevitable crypto crash of 2021. The value almost doubled in the following few weeks after the changes took place. But does this mean history will repeat once the London Fork goes through and Ethereum will have another bullish run?
What Is The Berlin Fork
The update is named after the capital of German where the first Ethereum DevCon took place. Whenever a new hard fork goes live significant changes happen on the blockchain, which usually results in irreversible changes that make the previous version incompatible.
The Berlin hard fork incorporated improvements in the form of Ethereum Improvement Proposals (EIP) with the main focus on improving the intensely high gas fees of Ether. These EIPs also improve the security network protocols, which are included in EIP-2565, EIP-2929, EIP-2718, and EIP-2930.
Berlin Fork Bull Run
Despite many people saying that Ethereum’s price has been up purely due to Bitcoin’s success, the Berlin Fork update has definitely contributed as well. Among many other major factors that took place in 2021, such as the skyrocketing popularity of NFTs or the release of Ether Futures, have all contributed to the Ethereum rising.
Gas in Ethereum refers to the figurative fuel for transactions and protection against spam attacks. Every Ethereum transaction requires fees that have been alarmingly high. While the fees have ever since been more stable the cost remains pretty much unchanged.
Although the present EIPs were designed to improve the gas fee structure, the Berlin fork mainly focuses on making the cost more predictable, and EIP 1559 is the one that is going to lower the gas cost significantly.
The London Hard Fork
The fork update is scheduled for July of 2021 and is by far the most important change in recent memory. The London is another hard fork incompatible with the old version that follows the Berlin. However, this is already where the problem begins as the EIP 1559 is highly controversial.
Usually, when a new version comes to play everyone switches to the new network and everything stays the same. However, the new proposal is so controversial that over 60% of the Ethereum network hash rate is against it meaning the Etherereum could split into two versions similar to when Bitcoin Cash split from Bitcoin.
London – EIP 1559
The high gas fees of Ethereum have always been the elephant in the room. The gas price combined with other numerous network issues of Ethereum, makes people worry and express doubts about the future of DeFi, which is why the EIP-1559 was proposed.
In the EIP, fees are completely restructured into two – base fees and inclusion fees. These fees are much more accurate to determine by wallets and reduce the circulating supply of Ether, which is extremely beneficial for holders. However, the EIP reduces the circulation by burning the base fee instead of giving it to the miners, which is where the controversy begins
Controversy Of EIP-1559
Not only does the new EIP burn the base fee entirely but the remaining inclusion fee is optional for holders. This is tragic for miners that make a living off Ethereum as the revenue they make will decrease significantly.
The Ethereum mining industry has been making a fortune so far with $1.4 billion generated in February alone and almost half of that in fees. The mining community has risen together to boycott the new changes, threatening to prevent transactions from going through with a 51% attack. These are no empty threats as more than 60% of the total network hash rate are opposing the London, including some of the largest supporters.
Are The New Hard Forks Beneficial?
Objectively the newly scheduled hard forks are drastically beneficial to the state of Ethereum and decentralized finance. Reduced gas fees mean for much better scalability of transactions and with the elephant in the room addressed Ethereum can move forward.
However, the increase in value is uncertain. While totally beneficial only time will tell what the actual outcome will be. The potential split of Ethereum would result in yet another version of Ethereum that could negatively damage the overall price of ETH. Moreover, the consequences of reducing mining revenue could have unpredictable results from within the community.