Ethereum (ETH) Hard-Forking, Here’s What to Expect
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The Ethereum (ETH) network is expected to go through the London update some time between August 4 and August 5, depending on relative block time. At that point, all nodes will switch to the changes of EIP-1559, significantly changing the gas fee schedule, increasing ETH burn and making the issuance of ETH slowly deflate.
Ahead of the hard fork, ETH prices rallied to recover from the dip to the $1,800 range. A day ahead of the fork, ETH traded at $2,482.06, down about 3% in the past day and mostly preserving its weekly gains.
Unlike BTC, ETH trading volumes are expanding, and have reached the level of BTC activity, at around $23B in 24 hours. The London hard fork is also already acting to boost the ETH price, and may continue to affect trading.
Will the Hard Fork Cause Disruptions
About two days ahead of the hard fork, node readiness is still relatively low. About 64% of all Ethereum nodes are ready to implement the London update. The adoption may become more rapid in the coming days, until most nodes are ready.
The nodes and operations ran by exchanges have still not signalled readiness. Most large exchanges expect temporary disruptions of some services. The Binance International exchange recently issued a warning on the upcoming hard fork. The exchange will suspend ETH and token transfers to and from its wallets as of 11:45 UTC on August 5.
Afterward, the renewal of services and wallet usage will depend on the actual stability of the forked chain.
It is possible that there may be deposit and withdrawal restrictions in the hours surrounding the hard fork, which will affect ETH, ERC-20 tokens and other Ethereum-based assets. For now, only the Crypto.com protocol has warned about disruptions to sending and receiving tokens.
ETH transfers affect multiple sectors, including NFT transactions, token trading and transactions, as well as ETH transfers. However, the disruptions may only be temporary.
Will the Hard Fork Boost the Value of ETH
The expectations for the London hard fork is to become one of the biggest innovation events for Ethereum. For end users, this will decrease gas fees, and miners will stop receiving the fees, which will instead be sent to a burn address.
In the months leading up to the hard fork, ETH gas fees have not grown significantly, with rare spikes for separate projects and NFT sales.
Only after the London hard fork is completed will end users feel the final effect of a fixed fee for transactions and the schedules to give transactions a priority. Part of the proposals included in the London hard fork will optimize gas usage for smart contracts.
Mining will remain viable after the London hard fork, as the update will include another delay in the “difficulty time bomb” mechanism. The delay will be valid until December 2021, with the intention of creating an incentive to turn to ETH staking and launch ETH 2.0 as a proof-of-stake network.
Is a Chain Split Scenario Possible
Although miners will still be able to profit somewhat from ETH block creation, the lowered fees may lead to several scenarios.
Even the Binance exchange admits that the final result of the hard fork is still uncertain, and miners may actually reject some of the upgrades.
In that case, two chains will be created, each carrying all the assets of the other chain. The winning and more stable chain will then be considered the official Ethereum asset.
In that scenario, great confusion may be caused regarding DeFi tokens. Additionally, it is possible that both chains continue to be mined, creating a mining war. It is also possible that a brand-new asset will be created.
Ethereum Classic Benefits from ETH Hype
Once again, the price of Ethereum Classic (ETC) is starting to benefit from the ETH price hype. ETC is just under $50, still far from its Apri peak around $130.
Ethereum Classic remains a viable chain for miners, though its activity is relatively lower. However, trading opportunities and mining rewards make up for the lack of a distributed app ecosystem and token activity.
Ethereum Cannot be Replaced Easily
Despite its flaws, the Ethereum ecosystem is here to stay. With more than $71B currently locked in DeFi projects, as well as a growing NFT sector, the Ethereum network will remain the main hub of activity.
The effect of the proposal will not curb the supply of ETH dramatically. However, predictions envision a bullish outlook for ETH in the longer term.
Currently, another nearly 6.5M ETH tokens are already locked into the ETH 2.0 staking contract, and will not be re-entering the market. The ETH supply has expanded to nearly 117M tokens, already going over previous suggested supply restrictions of around 100M ETH in total.
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