On June 24, the London hard fork, which includes changes to the EIP-1559 proposal, activated on the Ropsten testnet. In just a day, 88,000 ETH was burned.
As part of EIP-1559, when paying commissions, ETH coins burned. It will reduce transaction fees, but at the same time reduce the income of miners. The changes turned out to be very effective – 88,000 ETH burned on the test network. We are talking, of course, about the same test coins that have no real value. But if that amount of ETH were burned on the main Ethereum network, then the amount of destroyed coins would be $ 177 million.
The London hardfork soon will activate on two more ETH test networks. And then the update will come to the main network of the second cryptocurrency. Next Testnet update is Goerli, then activation on Rinkeby network. The developers still have to determine the exact date of the hard fork for the mainnet.
According to ConsenSys estimates, after the changes in the framework of EIP-1559, the annual emission of ether will decrease by 1.6 million coins ($ 3.1 billion at the current rate), and inflation will fall to 1.4%. The developers are confident that this will provide additional incentive to move to the Proof-of-Stake (PoS) consensus.
Interestingly, a vulnerability discovered in EIP-1559 that could lead to network congestion. However, the developers fixed the error in time.
ETH difficulty bomb delayed
Another important part of this update is the EIP-3554.
The change in the code prescribed in it will postpone the “difficulty bomb”, which an algorithm embedded in the ETH protocol that can significantly increase the complexity of mining blocks after activation.
Due to the increase in block mining time, the emission of the coin will decrease every two weeks. At the moment, we can already observe an increase in block time.
At first, the difficulty bomb starts to act very slowly, but over time it gains momentum exponentially and eventually reaches a point where it is almost impossible to get a block.
And in essence, this will lead to the transition to PoS. ETH community advocates argue that proof-of-stake systems are more energy efficient than their proof-of-work counterparts.
Curiously, against the backdrop of these events, ETH began to grow again.
This can be explained both by playing ahead of market participants, taking into account the activation of the complexity bomb, and by a decrease in the supply of cryptocurrency. From the point of view of miners, the drop in emission is not such a catastrophic event, if it compensated by fiat currency, and for holders this option will become even more profitable.
However, an increase in block time leads to a drop in the network’s ability to process data. However, the current limits set precisely taking into account the block time and can changed if necessary. The only negative effect will be an increase in transaction confirmation time. On the Bitcoin network, it takes an average of 10 minutes to issue one block, while for ETH, one minute time can be quite a viable approach, especially if it is a temporary measure.
Provided that the current dynamics maintained, ETH may undergo halving even earlier than BTC.