What is the London Hard Fork and how will it benefit Ethereum?
According to Blockworks, “In software parlance, a hard fork is a split in the underlying base code of the software that takes it a different direction than before. Common in the blockchain and Web3.0 world, a hard fork allows groups with a different vision to take software in a different direction from the founders’ vision.”
Also referred to as “EIP-1559,” the London Hard Fork will make Ethereum transaction fees more predictable and will make the Ethereum ecosystem easier to use. It will also begin the process of burning Ethereum. This event is scheduled for August 4th or 5th, 2021.
Currently, one of the hang-ups that many crypto traders have with Ethereum is that transaction fees can be really high and hard to predict. Ethereum has used an auction system up to this point. Users bid against each other on the network. The busier the network is, the higher the fees go. This slows down the growth of Ethereum.
EIP-1559 will allow users to pay a base fee of sorts that is algorithmically determined instead of the bidding process. It will be smoother, quicker, less volatile, and more predictable. This is just one step towards lower fees. Ultimately, fees may not go much lower until Ethereum 2.0 is launched sometime in 2022.
Perhaps just as significant as the above stated change to the Ethereum network is the burning of ether. If there are fewer ether coins available, prices should be driven upwards, as long as the demand is still the same or higher. In the long-run, the burning of ether may have an effect similar to what we have seen with the history of the finite Bitcoin.
Can we expect a short-term bump in Ethereum prices? Have we already seen the bump in recent days? I cannot say with certainty. Some sources are predicting Ether prices to move somewhere in the $5000 to $10,000 range. We have heard this before, but now there is more substance behind the claim. It think that we will eventually get there; however, it may not come until Ethereum 2.0.
I do think that we can conclude that Ethereum is moving in the right direction as a network and has a strong future. Altcoins based on the Ethereum network would seem to enjoy a boost as well. This bodes well for BAT tokens, OMG, BNT, REP, ZRX, and others.