Since the introduction of Bitcoin and other cryptocurrencies, numerous updates have added new features to meet the increasing demand. To provide the most up-to-date features to crypto coins and their blockchain systems, developers frequently release updates on time. Every month, more new cryptos enter the digital market with the most recent and innovative features. As a result, it becomes critical for developers of some old and well-known cryptos to compete in order to stay ahead.
This month, Ethereum, the world’s second-largest cryptocurrency, received its most significant update. The developers of this open-source Blockchain system have launched a London Hard Fork update. The update is a revolution, with numerous new developments and features.
Thus, if you are a crypto enthusiast and are looking forward to learning more about the hard fork update of Ethereum, this guide will bring you the actual information about the update and how it will impact Ethereum as a digital currency.
What is Hard Fork?
A hard fork, also known as a fork, is primarily associated with blockchain technology. It is a drastic change to the network protocol system in which invalid blocks, including valid transactions, are automatically made valid. All nodes or users must install the most recent version of the protocol system during the hard fork update.
Members of the crypto community who are dissatisfied with the functionalities provided by the existing blockchain implementation may initiate forks.
Furthermore, they may emerge as a strategy for public financing support for new technology projects or the most recent cryptocurrency offerings.
How do Forks work?
Any crypto platform technology could face a fork, but Bitcoin is exempt. The reason is that simple: blockchains and cryptocurrency work similarly regardless of which crypto platform they’re on. However, you can take into account the blocks in blockchains as cryptographic keys that move memory. Since the rules of the blockchain are set by miners that move the memory in the network, these miners usually understand the new guidelines.
In any case, the mutual agreement of all the miners is essential to the new rules and concerns about what constitutes a legitimate block in the blockchain. Hence, when there is a need to change the rules, you might need to “fork it”—like a fork in a road to show that there’s been a change in or a redirection to the protocol. After that, the developers can update all the software.
To reflect the latest updates and rules, through this forking system, different digital currency forms with similar names like bitcoin have become: bitcoin cash, bitcoin gold, and many others. However, for casual investors, it could be hard to differentiate between these cryptocurrencies when mapping their different forks onto a timeline.
What is the London Hard Fork Update of Ethereum?
Simply put, the London hard fork doesn’t have anything to do with London, if you were thinking about it. The update is officially called Ethereum Improvement Protocol 1559 (EIP-1559). However, the term “hard fork” basically implies an unchangeable, permanent adjustment to the blockchain. The London word is used in the updates, as usually the crypto community or developers generally use their city’s name after the update, as it has facilitated its own international conference of developers.
This is a contradictory, regressive overhaul, implying that excavators should download the London Hard Fork to keep utilizing the Ethereum organization. Before they carried out this update, a visual session was held for each square to decide the expense needed to execute contracts on Ethereum. During the occupied periods, it causes higher exchange costs and lower prices during lean patches. Additionally, for miners, it causes a great deal of vulnerability.
With the London Hard Fork update, all transaction fees will be determined automatically based on the current demand and supply trend. As a result, this update is intended to bring consistency to transaction costs.
Furthermore, the ETH supply will face a significant EIP 1559. Moving on, this modifies the base fee. This fee will be burned because it was previously intended to be paid in ETH, and more ETH will be burned with each transaction. As a result, it would have a positive impact on ETH, as the burning of this fee could result in an increase in the price of Ethereum. However, this does not imply that ETH will experience deflation. This hypothetically deflationary system was not present in Ethereum prior to the hard fork.
How will it benefit the Investors?
Usually, the updates are released to benefit the users. Thus, the hard fork will also help big investors in the long haul. Undoubtedly, after Bitcoin, Ethereum is the most famous and reputed cryptocurrency globally, with the potential and elements to challenge Bitcoin currently. Specifically, miners will be attracted to Ethereum and increase adoption once the blockchain price settles down. Consequently, it helps increase the demand manifold and will result in the price increase of tokens.
With this recent update, the market is already hot with the discussion on Ethereum’s market capitalization rather than Bitcoin. It will be exciting to witness the current competition between Bitcoin and Ether. No doubt, currently, Bitcoin is staying ahead of Ethereum, but ETH is the leading contender to Bitcoin in the crypto world. In any case, it is essential to consider that Ethereum is likewise ahead of Bitcoin on various elements.
How will it impact the Ethereum-Bitcoin equation?
We can’t expect Ethereum’s price to skyrocket overnight in comparison to Bitcoin. The development of digital coins is triggered by certain factors such as market capitalization, blockchain systems, and widespread currency adoption. In terms of Bitcoin, the market cap volume is around 21 million coins. The current Bitcoin blockchain can support up to a 21 million cap capacity, and there will be no new coin mining. However, Ethereum, with the launch of its “London hard fork,” has encouraged miners to continue mining. The mining process is still in progress, but this update may discourage miners from continuing to mine Ethereum.
It is probably expected that this new update adoption in Ethereum might cause a slight deflation in the market. It makes the Ethereum system a bit complex to create non-fungible tokens (NFT) on the Ethereum blockchain. Investors will not only go to Ethereum for more growth in (DeFi) decentralized finance, but will also reach out to DeFi and NFTs via blockchain.
What’s the need for a Hard Fork?
There are various justifications for why developers introduced a hard fork. For instance, revising significant security vulnerabilities found in older versions of the system to add new features could also reverse the transaction. Such as when the hard fork was created on Ethereum to tackle or reverse the effect of hacking on the Decentralized Autonomous Organization (DAO).
After the hack, a voting session was held, where almost the majority of community members of Ethereum consistently stood in favor of a hard fork. The possible reason is to roll back the transactions that were redirected around ten million dollars of digital currency by a mysterious hacker. Moreover, DAO token holders will also get back their ether (ETH) funds with the hard fork. The hard fork proposal didn’t precisely loosen up the network’s transactions. However, it moved the assets attached to the DAO to a new smart contract made with the sole motivation of allowing the owners to withdraw their funds. As a result, the DOA holders could enjoy a withdrawal rate of around 1 ETH to 100 DOA.
To summarize, updates are always intended to provide new functionalities as well as older security fixes. Since the inception of crypto and blockchain systems, numerous modifications and new fixes have been introduced to provide users with greater market diversity. As a result, a hard fork update has already begun to have an impact on Ether and its blockchain system.
Without a doubt, users and investors, including miners, may face some challenges during Ethereum’s early stages. This new update, on the other hand, will serve its purpose of protecting Ethereum and the valuable assets it contains from hackers. As a result, the hard fork update will undoubtedly benefit Ethereum in the long run.