Everything You Need to Know About Ethereum's 'London Upgrade'

Bitcoin has been the undisputed market leader since the cryptocurrency wave swept the world. While Ethereum has long been the lone challenger to the world's largest cryptocurrency, its technology has suffered from several issues that have held it back. Gradually, the gap has widened between them. To overcome the challenges facing Ethereum, its developers have now released an upgrade. Colloquially called the “London upgrade”, it has rallied the cryptocurrency market. Investors seem upbeat about it as it brings more transparency in terms of transaction fee on the network. Some experts predict the latest changes to Ethereum technology in a long time could end Bitcoin's dominance. 

A lot of people get confused between Ether and Ethereum. So, let's address that first. 

Ethereum and Ether 

Ethereum is a technology that makes use of blockchain technology to facilitate peer-to-peer contracts. Unlike traditional contracts, written in human languages, these smart contracts are written in codes that a computer can execute. The Ethereum network acts as a single decentralised computer that runs the code, meaning all computers in the network will agree with the outcome of each smart contract. 

To run the network, developers need some kind of “gas”. Ether is the cryptocurrency coin that acts as its fuel. It is used to pay for transaction fees and computational services. When people send or receive smart contracts, computers are required to validate those transactions. Ether comes into existence by a successful validation, the process is called mining. Simply, Ether is the native currency and Ethereum is the technology that produces it. But the word Ethereum is casually also used to mean the currency. People can mine Ether or buy those that are already mined from an online exchange. Bitcoin price in India was around Rs. 35.3 lakhs and Ethereum price in India was around Rs. 2.47 lakhs as of 6pm IST on August 13.

What is the new Ethereum upgrade? 

The Ethereum London Hard Fork upgrade is a set of five improvement proposals. One of them is called EIP-1559. It is aimed at giving speed to Ether mining and also incentivising it. Unlike Bitcoin, there is no limit to mining Ether coins, which makes it an inflationary cryptocurrency. Miners are paid new coins for validating each block of information. They are compensated with transaction fees that are paid by users. One of the biggest benefits of the London upgrade is that it has enabled the Ethereum network to handle many more transactions per second. It will help with scalability and tackle the high transaction fees — one of the biggest complaints of small investors or those who make frequent transactions. 

Reduction in number of Ether coins in circulation 

Another big feature of the EIP-1559 upgrade is that it is designed to reduce the number of Ether coins in circulating at any given time. This could potentially result in higher prices, assuming the demand remains constant. This upgrade will make Ether a deflationary cryptocurrency like Bitcoin, whose supply has already been limited at 21 million coins. This means over time their purchasing power will increase. 

What does a hard fork mean? 

When the majority of a cryptocurrency community, comprising developers, miners, and investors decide to change the fundamental rules governing the underlying technology, a hard fork happens. 

What does the Ethereum upgrade mean for investors? 

Ether is one of the fastest-growing cryptocurrencies and is only behind Bitcoin. But the gap between them runs into thousands of dollars. This update will create more transparency and, as a result, more trust in the future of this coin as a store of value, which should translate into attracting more investors. As the demand rises, so will the price. Many experts believe the latest upgrade has given Ethereum the firepower to challenge Bitcoin, which has shown immense volatility in the recent past.