Ethereum's London and Shanghai Upgrades
Improved gas fees and the potential for merging ETH1/ETH2
Ethereum's London and Shanghai Upgrades
In the second half of 2021, the Ethereum community is set to receive two significant upgrades: the "London Upgrade" and the "Shanghai Upgrade". Let's dig in!
The London Upgrade includes two critical proposals for improving the Ethereum network:
EIP-1559 aims to change the current gas fee structure of the Ethereum mainnet, introducing a mechanism for ETH token burning. This change will make Ethereum gas fees more predictable and stable, and approximately half of the network gas fees will be directly burned, providing a long-term value support for ETH.
EIP-3529 will directly impact the invalidation of Gas Tokens on the upgraded Ethereum network. If you're holding Gas Tokens (such as CHI and GST2), we recommend selling them before the upgrade or using them when gas fees are high. Otherwise, after the update, these Gas Tokens will theoretically be worth zero.
EIP-3554 relates to miners, and the Difficulty Bomb will be delayed until December 1, 2021, which is predicted to be the final deadline for Ethereum PoW miners.
According to the official announcement by the Ethereum Foundation on June 18, the Ethereum mainnet London Upgrade will take place after all the testnets successfully complete it. Here is the current timeline:
- Ropsten: June 24
- Goerli: June 30
- Rinkeby: July 7
- Kovan: TBD (may take place after the mainnet upgrade)
The Shanghai Upgrade may realize the merger of ETH1/ETH2, changing the consensus mechanism of the Ethereum mainnet.
Stay tuned for more details about the Ethereum London Upgrade!
London Upgrade: Five EIPs Explained
The London upgrade for Ethereum includes five EIPs (Ethereum Improvement Proposals) that will bring significant changes to the network. Let's take a closer look at each one.
One of the most significant changes in the history of Ethereum, EIP-1559, aims to improve the current gas fee mechanism by introducing a "base fee" + "miner tips" structure. This change will help achieve predictable and stable gas fees, substituting the current first-price auction mechanism that prioritizes transactions with high gas prices. The block size will also have a flexible upper limit that adjusts according to demand. The long-term goal of this EIP is to set a new hard cap of 10 million gas per block and 20 million gas per block.
The EIP-3198 proposal will add a new opcode, BASEFEE, to the network. This opcode will return the latest base fee value set in the block header, allowing better transparency of charging costs for transactions.
EIP-3529 may impact the validity of Gas Tokens (such as CHI and GST2) on Ethereum. It proposes to cancel the gas refund for SELFDESTRUCT and reduce the gas refund for SSTORE, discouraging the creation of new Gas Token contracts.
EIP-3541 intends to reject new contracts starting with 0xEF bytecode, as these contracts can cause issues with the protocol's code and disrupt the network.
This proposal will postpone the Difficulty Bomb - an increase in the difficulty level of mining Ethereum that makes block verification more complex - to December 1, 2021, or whenever the final deadline for Ethereum PoW miners occurs.
Overall, the London upgrade will bring significant enhancements to the Ethereum network, addressing various scalability and security issues.
Understanding EIP-1559 and its Impact on Ethereum's Future
EIP-1559 is an Ethereum Improvement Proposal that seeks to mitigate the issues of high transaction fees and unpredictable gas prices on the Ethereum network. This update aims to introduce a new fee market model that replaces the existing auction-based fee mechanism.
Miner Tips: It is only necessary for users to set their miner tips, as miners will prioritize transactions with higher tip rates.
Fee Cap: The fee cap represents the maximum fee users are willing to pay for a transaction and can be used to wait for a lower base fee when the network is congested.
Burning of Base Fees: The most anticipated feature of EIP-1559 is the burning of base fees, which can effectively reduce the inflation rate of Ether tokens and potentially lead to a deflationary era in conjunction with the transition to PoS.
BASEFEE Opcode: EIP-3198 adds the BASEFEE opcode to provide the current block's base fee value to smart contracts.
Elimination of Gas Tokens: EIP-3529 will render Gas Tokens useless by removing the gas refund mechanism, which currently leads to an increase in state size rather than incentivizing its clearance.
Impact on Ethereum's Future
EIP-1559 is a significant update that can have a far-reaching impact on Ethereum's economics and future development. By reducing the inflation rate of Ether tokens and stabilizing gas prices, it can make Ethereum more attractive to investors and developers alike.
Image source: ethereum.org
Image source: cryptopotato.com
Image source: analyticssteps.com
Image source: ethereum.org
Gas refunds for the SELFDESTRUCT opcode will be canceled, and gas refunds for the SSTORE opcode will be lowered, which will render the Gas Token mechanism ineffective after the upgrade. This will have a significant impact on Gas Token holders, as Gas Token prices are expected to drop to zero after the London upgrade. It is recommended to sell Gas Tokens before the upgrade, or use them before they become obsolete. However, using Gas Tokens to offset transaction fees is currently inefficient, as gas fees on the mainnet are low. For example, when using CHI, it is best to use gas fees that are double those used to mint it to offset transaction fees effectively.
Gas Token image source: https://i.imgur.com/aR1wzW1.png
EIP-3541 is mainly a developer-related EIP and has little impact on regular users. It proposes a simple change that lays the foundation for the EVM improvement proposed in EIP-3540. Once EIP-3541 is implemented, new contracts starting with the 0xEF bytecode will not be deployable, and existing contracts will not be affected. Contracts that deploy with bytecodes starting with 0xEF, but not identical to those in existing contracts, will be rolled back to ensure compatibility with EIP-3540 semantics after the London upgrade. EIP-3540 requires a separate network upgrade, and if it is not deployed, EIP-3541 can still be used to reserve the start byte for other solutions.
Ethereum logo image source: https://i.imgur.com/jgb15Na.png
EIP-3554 aims to delay the difficulty bomb until December 1, 2021, with the Shanghai upgrade. The difficulty bomb has already been postponed three times during the Metropolis (EIP-649), Constantinople (EIP-1234), and Muir Glacier (EIP-2384) upgrades. The purpose of including the difficulty bomb in the Shanghai upgrade is to smoothly transition Ethereum from PoW to PoS. After the difficulty bomb is introduced, mining difficulty will increase exponentially as block height increases, leading eventually to the Ice Age and forcing miners to abandon the old chain to complete Ethereum's shift to PoS. The current plan is to merge the current PoW network and beacon chain in the Ethereum mainnet during the Shanghai upgrade in December.
Shanghai skyline image source: https://i.imgur.com/FfznuZP.png
Ethereum London Upgrade and the Anticipation for EIP-1559 Fee-Burning Mechanism
PoS will be adopted, which also means that Ethereum PoW miners will be able to mine until at least December, depending on the Shanghai upgrade execution time. The EIP-1559 fee-burning mechanism is the most anticipated part of the London Upgrade, as it can effectively reduce the inflation rate of ETH tokens. The community has already developed a visualization website for ETH fee burning data.
Despite the recent decline in transaction activity on the Ethereum network, we believe that the future prosperity of the Ethereum ecosystem is inevitable, and this prosperity will directly affect the value and price of ETH through fee burning. Although some users may question whether the popularity of Layer2 will lead to a decrease in total network fees, this is currently uncertain because this relationship may present a dynamic balance in the future.
The Ethereum London upgrade, which the community has been looking forward to, will take place in July or August, and EIP-1559 will push ETH into a new era.
My Thoughts on the Future of Cryptocurrency
The article only represents the author's personal opinions and does not represent the objective viewpoint and position of Blocktimes. All content and views are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and Blocktimes will not be responsible for any direct or indirect losses incurred by investors.
Cryptocurrency has been a hot topic in recent years, and it's not hard to see why. With the rise of blockchain technology, cryptocurrencies have become increasingly popular as a means of conducting transactions without the need for a central authority. However, the future of cryptocurrency remains uncertain, and it's unclear where the technology will go from here. In this article, I'll share some of my thoughts on where I see cryptocurrency heading in the future.
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Source: Crypto News Flash
Overall, I believe that cryptocurrency has a bright future ahead of it. As technology continues to evolve, we'll likely see more use cases for cryptocurrency, and increased adoption will only help it gain more traction. However, like any investment, there are risks involved, and investors should always do their own research before making any decisions. Regardless of what happens, it will be interesting to see where cryptocurrency goes from here.