The London hard fork is an upgrade to the Ethereum blockchain that will be released in the beginning of August 2021. In this article, we’ve focused on the main features and improvements that are expected as a result of this update.
Ethereum is a continuously developing ecosystem with steady advancements that improve its functionality and user interaction with the blockchain. One of the blockchain’s latest upgrades, Berlin, took place in April 2021. Affecting how the gas cost of a transaction is computed, it paved the way for a new system update called London.
The Ethereum London hard fork is an upgrade that will bring the network closer to Ethereum 2.0, a set of interconnected updates to make Ethereum more scalable, secure and sustainable.
According to Ethereum’s lead developer, Tim Beiko, the work on the London network upgrade has been in progress since the Berlin hard fork was rolled out. He posted a block activation proposal on Github on 6th July 2021, revealing that the mainnet upgrade is set to deploy at block 12,965,000. This is expected to occur on 5th August 2021. On 8th July 2021, Beiko tweeted that all 3 testnets have been successfully upgraded to London.
Why London? As stated by Tim Beiko, the London hard fork was named after the capital of England because the city hosted one of the Ethereum developer conferences, Devcon 1, in November 2015.
Following the Berlin upgrade, London includes a few Ethereum Improvement Proposals (EIPs) such as EIP-1559, EIP-3198, EIP-3529, EIP-3541 and EIP-3554.
EIP-1559 introduces a “base fee” in blocks on Ethereum to track the gas price that the network accepts from transactions, based on demand for blockspace. The aim is to make it easier for wallets and users to estimate what the right price for their transaction should be by taking into account the current level of network congestion.
Besides that EIP-1559 adds a new transaction type where users can specify the maximum fee they are willing to pay, along with the maximum they are willing to send to the miner, and get a refund for the difference between that maximum and the base fee and miner tip.
The EIP also includes a critical improvement to the Ethereum network’s economics, which will result in part of transaction fees to be burnt.
Based on data provided by Dune Analytics, EIP-1559 activation could result in a total of 2,967,937 ETH being burned in a year, which would reduce Ether supply growth by 76% over the period. This may result in further increase of the asset’s price.
EIP-3198 adds an opcode, BASEFEE, which returns the value of the base fee for the block it is executed in. By enabling smart contracts to access this value on a chain, the EIP is aimed to help with submitting fraud proofs and creating unverified gas price derivatives.
EIP-3529 lowers “execution gas refund” from 50% to a maximum of 20%. According to Beiko, this will offset some of the additional block size variance introduced by EIP-1559, allowing blocks to use up to twice the current gas limit.
EIP-3541 lays the groundwork for broader Ethereum Virtual Machine (EVM) improvements and rejects new contracts starting with the 0xEF byte. However, existing contracts will not be affected.
EIP-3554 delays the “difficulty bomb”, also known as the ice age, to 1st December 2021. It’s a mechanism that was introduced in Ethereum to “freeze” mining because of the network transitions to Proof of Stake which will mark the transition to Ethereum 2.0. Still, the lead developer doesn’t exclude the presence of new delays. He suggests that if Proof of Stake transition is not implemented by December 2021, then another necessary network upgrade will occur before this.
Ethereum сo-founder, Joseph Lubin, has given his take on the future of the network. Speaking at an interview with CNBC, he stated that the London hard fork will trigger an “enormous” run-up in demand and value of Ethereum.
“We’re seeing exponential demand for the Ether token to run transactions, to run programs on the network, on top of essentially massively decreasing supply. So we anticipate that there will be an enormous run-up in demand and the value of Ether,” said Joseph Lubin.
The further network upgrade, Ethereum 2.0, has already resulted in the growth of interest in Ether among institutional investors. On 8th February 2021, Chicago Mercantile Exchange (CME) launched Ethereum futures. Also, earlier in the year, the Canadian public company, Mogo, bought 146 ETH, while the investment company, SkyBridge Capital, has announced the launch of a private Ethereum fund and plans to apply for an Ether ETF.