Ethereum completes London upgrade, ushering in a new era of "deflation"
Author | Qin Xiaofeng
Editor | Hao Fangzhou
Produced | Odaily
Author | Qin Xiaofeng
Editor | Hao Fangzhou
Produced | Odaily
At 8:33 tonight, Beijing time, the Ethereum network reached the established block height of 12,965,000, completed the London hard fork upgrade, and implemented a total of five community proposals: IP-1559, EIP-3198, EIP-3529, EIP-3541 and EIP-3554.
This upgrade is the tenth hard fork upgrade in the history of Ethereum, and it is also the most concerned by the outside world.
On the one hand, EIP-1559, which is the highlight of this upgrade, has been controversial from its proposal to its implementation, which once aroused dissatisfaction among the miners. Some mining pools tried to demonstrate through the gathering of computing power, but ultimately failed to change the trend of the tide. On the other hand, this upgrade was originally scheduled to be carried out in mid-July, but was later postponed, and a loophole was discovered two weeks before the official implementation, adding to the uncertainty again.
Fortunately, the dust has settled, and Ethereum has successfully completed its penultimate upgrade before merging with Eth2.0. The last "Shanghai upgrade" is tentatively scheduled for October this year. The POS era of Ethereum is coming.
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1. The twists and turns of EIP-1559
Although it is known as a "hard fork upgrade", this London upgrade did not generate new coins, reminding the majority of crypto investors to pay attention to screening and avoid the risk of counterfeit coins. In addition, for ordinary currency holders, there is no need to perform any operations (token transfer, currency exchange), and relevant updates are performed by Ethereum nodes and clients.
The following introduces the key content of this upgrade. There are a total of five community proposals (EIP), namely:
EIP-1559: Changing the fee market for the ETH 1.0 chain;
EIP-3198: BASEFEE opcode;
EIP-3529: Reduce refunds;
EIP-3541: Reject new contracts starting with 0xEF bytes;EIP-3554: Difficulty bomb delayed until December 1, 2021.。
One of the most concerning is EIP-1559. The proposal was born three years ago. It was first proposed by V God, the founder of Ethereum, and then improved by community members, aiming to change the transaction fees of the Ethereum network. However, since the Ethereum network had few applications at that time and the gas fee was not expensive, the proposal did not cause much waves after it was proposed. Until last year when DeFi was hot and the Ethereum ecosystem ushered in a big explosion, the gas problem became an unavoidable problem, and EIP-1559 once again entered the public's field of vision.
Briefly introduce EIP-1559. In the past, when users transferred money on Ethereum, they needed to pay a gas fee to the miners on demand, and the miners could prioritize transactions with high gas fees. After the implementation of EIP-1559, the Gas handling fee will be sent to the network itself as a base fee for destruction, and users can also optionally pay the miners an inclusion fee. The setting of the basic fee is determined by an algorithm, and the purpose is to make it easier for users to pay a reasonable fee. recommended reading
"Understanding EIP-1559's Changes to Ethereum's Economic Model in One Article"
Therefore, the proposal has the support of users and developers. But the miners are not interested in this proposal.
But more importantly, the miner community sees itself as part of an ecological abandonment. In the past few years, the price of Ethereum has been low, and the ecology has not developed. Miners stick to it and maintain network security. Nowadays, with the development of DeFi, the ecological development of the entire Ethereum is thriving. Naturally, it is not acceptable to reduce the interests of miners in order to reduce Gas fees. Moreover, EIP-1599 had been implemented in Filecoin for a period of time before, but the effect was not good, which made miners feel even more upset.
As a result, miners have voiced their voices against the implementation of EIP-1559. According to statistics, 12 large and small mining pools, including Spark, Ethermine, and flexpool, have issued statements opposing EIP-1559, which accounts for more than 60% of the total computing power. In addition, in March this year, Twitter user "Red Panda Mining" launched a campaign to call on miners who opposed EIP-1559 to switch their computing power to the opposition mining pool for demonstrations and swear sovereignty, which ultimately failed.
Although the miners did not change the final result, the voice of the miners was still heard by the Ethereum community. It should be noted that the voices and demonstrations were carried out in a relatively moderate manner, which did not cause a split in the Ethereum community.
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2. The upgrade brings "deflation"?
The Ethereum ecological basic token ETH does not set a total issuance amount, and it is always in a state of inflation. Although V God had proposed in 2018 that the upper limit was set at 120 million, it was not really implemented, and in the end it just became an imagination.Watch the BurnAn important reason why this London upgrade has attracted much attention is that after the implementation of EIP-1559, the base fee paid by users will be burned, pushing Ethereum into the "deflation era".
Kyle Samani, co-founder of investment company Multicoin Capital, said: "The London upgrade is one of the most interesting and important upgrades in the history of Ethereum. By reducing the supply of tokens, it can increase scarcity and increase prices."
Tracking website according to EIP-1559
According to the data, about 800 ETH test coins were destroyed one day after the Ropsten test network was upgraded and deployed in London. According to this data calculation, the annual destruction amount will reach 300,000 ETH. And the more active the network, the greater the amount of burning. According to the real transaction volume of the Ethereum network in the past year, if EIP-1559 had been deployed in August last year, the amount of ETH destroyed would exceed one million. This hypothetical data sounds exaggerated, but it undoubtedly gave Ethereum investors a shot in the arm.
(Odaily Note: Just after Ethereum completed the London upgrade, it burned 54 ETH in half an hour; according to this data, the amount of destruction will reach nearly 2,600 ETH a day, and about 950,000 ETH a year.)
Bloomberg's calculations show that the Ethereum London upgrade will reduce the supply rate of ETH by destroying the base fee (roughly 25-75%) of the 13,000 new ETH issued per day (gas fees paid to miners) This move will reduce the annual supply of ETH by about 4%, and is expected to push up the price of ETH; and after switching to POS next year, the supply may further decline.
Of course, in the long run, the price of ETH depends on its ecological growth. In the past year, Ethereum has taken off successfully with DeFi applications, and the price of ETH soared from $300 to more than $4,500 at one point, an increase of more than 15 times.
“DeFi is building a more accessible and democratized alternative financial system, primarily built through decentralized applications on the Ethereum network. These developments bode well for the future of the financial industry, where effective regulation will Promote the continued growth of the DeFi industry." Iwa Salami, a senior lecturer at the University of East London, expressed confidence in Ethereum's DeFi business.
Dan Morehead, founder of Pantera Capital, said that the London upgrade will help ethereum catch up with bitcoin, making ethereum more like a fixed asset. “We will see a shift in people, who will also store their wealth in ETH, not just in Bitcoin. The widespread adoption of Ethereum DeFi will also make it larger than Bitcoin.”
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3. The more frustrated you become, the more courageous you will be, moving towards the future
Since its birth in 2014, Ethereum has gone through 7 years. As one of the earliest public chains, Ethereum, which has been brave in innovation all the way, was once dubbed the "King of Public Chains".
Joel Monegro, a partner at USV, once commented that the Ethereum community is chaotic but vibrant—chaotic and full of vitality, which is indeed the case.
The confusion lies in: on the one hand, after the demand for ICO fundraising plummeted, the price of ETH has been falling all the way, and the income is far lower than other mainstream currencies; on the other hand, the delay of Eth2. , It is unknown when it will land, and the future of miners is uncertain; in addition, frequent incidents such as community disputes and governance difficulties have also made the outside world suspicious of the stability of the Ethereum ecosystem.
