In 24 hours, Ethereum will receive its most important upgrade

It should come as no surprise that when the ethereum network block reaches 12,965,000, we will see the Ethereum London hard fork upgrade at around 20:00 GMT on August 5.

Since the ethereum secondary market surged to thousands of dollars, there have been a lot of top capital, Kols, and even securities writing research reports, arguing and wondering whether the value of Ethereum can surpass that of bitcoin. Among their arguments, London's upgrade on August 5th must be one.

This is the most important system update in years for the world's second most valuable and ecologically rich decentralized network, and the most critical upgrade before the iteration to Ethereum 2.0. In this update, five community proposals (EIP) will be embedded into the code of the Ethereum network, and the implementation of EIP-1559 will be the main player. The transaction logic that has existed since the birth of Ethereum has been completely changed with the advent of IP-1559.

Review IP-1559

In The Ethereum network, transactions initiated by users need to be packaged by miners to complete, and when multiple transactions appear in front of miners together, the miners will package the first transaction according to the bidding logic, that is, the user who gave the miner more money (Gas fees), the first transaction. This has not changed in the six years that Eifang has been operating.

But the problem is that the larger the number of users, the more transactions on the Ethereum network, the higher the Gas fees that users need to give, in order to successfully enter the block, the users fight Gas War.

EIP-1559  It is a proposal to improve the transaction fee mechanism of Ethereum jointly proposed by Vitalik Buterin, co-founder of Ethereum, and Eric Conner, founder of Ethhub_io. In August 2018, Vitalik published a paperBlockchain Resource PricingFrom the perspective of economics, this paper expounds the problems of the existing transaction fee mechanism and puts forward the prototype of the solution. Later, in  ZCash  Community, Vitalik further refined the scheme. At the Ethereum Core Devs Eth1x/Istanbul Planning Meeting in 2019,Vitalik introduced the research background, objectives and mechanism of EIP1559. The IP-1559 proposal won't be implemented until three years later, when the London upgrade is scheduled for 2021, because the transaction fee changes will affect the main stakeholder groups of Ethereum (users, developers, miners, wallets, etc.). As the research background involves complex economics, BlockBeats has sorted out the main mechanisms of the proposal and its impact on the Ethereum network.

Essentially, IP-1559 divides Gas fees into a "Base fee" that must be paid per transaction, based on the previous block's Base fee and block resource utilization, and a "Priority fee" that the user chooses to pay.

For the base rate, the base rate increases when the previous block utilization is above 50%; When utilization drops below 50%, the base rate decreases, the user cannot adjust the base rate, and the base rate is permanently destroyed by the network.

In addition to the base fee, the user pays a priority fee to the miner when initiating the transaction. The priority fee is used to compensate miners for the increased tertiary risk caused by the inclusion of transactions in the block. At the same time, users who want transactions to be blocked and executed as soon as possible can set high priority fees to ensure that transactions are included immediately.

In most people's opinion, the implementation of IP-1559 will benefit both the economic aspect of the Ethereum network and the user experience.

From an economic perspective, as a portion of ETH is destroyed in each transaction, this means that the more economic activity takes place in the economy, the greater the amount of ETH will be destroyed. In other words, when the destruction rate is greater than the block reward issuance rate, Ethereum will enter a deflationary state.

As the head ecology of DeFi and NFT, The network activity of Ethereum is incomparable, which ensures that ETH will be destroyed continuously, thus increasing the relative scarcity of assets, which is very favorable for the value store nature of assets. At the same time, when people continue to use the network, most users need to buy ETH from the open market, which ensures a continuous demand for ETH. On the other hand, since the base fee is destroyed, miners only get priority fees and block incentives, which means that the natural selling pressure from miners is significantly reduced.

From the user experience side, users do not need to understand the transaction fee mechanism, just pay according to the wallet estimate, can get the best rate and expected results, which undoubtedly improves the user experience of Ethereum.

Of course, not everyone in the community is in favor of the implementation of IP-1559. According to A survey conducted by Ryu, more than 62% of the miners were against the proposal. In the long run, IP-1559 deprives miners of the opportunity to benefit from Ethereum's success.

However, the implementation of the proposal will not be affected by the pool opposition, the code will still be embedded as planned, so there is also the idea of "ethereum forking".

The chances of a fork are slim, though, as according to EtherNode, 70.3% of clients are ready to support IP-1559.

Other proposals that will be implemented in this upgrade

In addition to the much-anticipated IP-1559, there are four other proposals that will be implemented in this update. They are IP-3198, IP-3529, IP-3541, and IP-3554.

First, let's take a look at IP-3198. Ip-3198 is designed to optimize the user experience of smart contracts and enhance the security of the "proof of fraud" layer 2 network (State Channels, Plasma, Optimistic Rollups, etc.) by adding an opcode, Enable EVM to know the base rate for the current block.

Ip-3529 solves the current attack caused by using the Gas return mechanism by removing SELFDESTRUCT's return Gas and reducing SSTORE's return Gas, thus releasing more available resources in the block. At the same time,The proposal also makes the once-popular Gas Token no longer available.

Ip-3541 forbids the deployment of code starting with 0xEF byte to facilitate further updates in ethereum at a later date, while IP-3554 delays difficulty bombs to December 2021 to help developers better transition to Ethereum 2.0.

After the London upgrade, the entire focus of the ethereum community will be on the Ethereum 2.0 upgrade. Looking further down the road, merging Ethereum 1.0 with the beacon chain is the next highest priority and the most critical first step in what could be a multi-year upgrade.

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