The world's most-used blockchain updated its software, known
as the London hard fork, that includes a fee reduction feature called EIP 1559.
The fee cut already eliminated $2 million worth of its native cryptocurrency
Ether in only a few hours since taking effect, according to tracking website
ultrasound.money. That could put upward pressure on the price of Ether going
forward. Ethereum price in India stood at Rs. 2.05 lakhs as of 11:30am IST on
August 6.
“1559 is definitely the most important part of London,”
Buterin said in an interview with Bloomberg News from Singapore. The London
upgrade is “proof that the Ethereum ecosystem is able to make significant
changes.”
Ethereum and better-known-rival Bitcoin both operate using a
proof-of-work system that requires a global network of computers running around
the clock. Software developers at Ethereum have been working for years to
transition the blockchain to what's known as a proof-of-stake system - which
uses a totally different approach to secure the network that also eliminates
the carbon emissions issue. That change to ETH 2.0 will be carried out by a
process called the merge and is expected by early 2022 but could come as early
as year end, Buterin said.
The London hard fork “definitely makes me more confident
about the merge,” he said.
Ether has seen an already incredible price gain in the past
12 months, along with Bitcoin and other digital assets. Ether has risen about
590 percent in the past year, while Bitcoin has more than tripled, according to
data compiled by Bloomberg. Those gains come even after both coins fell by
about half from their recent all-time highs in April.
Part of that price surge in Ether is due to the explosion of
non-fungible tokens, or NFTs, which are digital files whose authenticity and
scarcity can be validated by a blockchain like Ethereum. NFTs have surged in
popularity this year, fueled by deals including the record-breaking $69.3
million sale of “Everydays: the First 5,000 Days” by digital artist Beeple and
a video of a LeBron James dunk. Now everyone from art galleries to the
International Olympic Committee, fashion houses and Twitter Inc. is offering
the digital tokens.
Cryptocurrency jumps after software upgrade
The change Thursday will also put Ethereum on a closer path
to how Bitcoin operates. Unlike Ether, Bitcoin has had since its start in 2009
a fixed supply of 21 million coins that will ever be created. That difference
has led critics of Ethereum to say it shouldn't be viewed as a similar digital
currency as Bitcoin.
Buterin initially had a cap on the amount of Ether that
could be created in his 2013 white paper that described the creation of Ethereum.
There was room for changes, however, and the idea of moving to proof of stake
was always the plan. Proof of stake would eventually change the economics of
Ether, Buterin said.
“There wasn't really the possibility of making very strong,
long-term commitments to the monetary policy,” he said of his original vision.
Then in 2018 he attended an economics and computation conference at Cornell
University where the inefficiency of first-price auctions was discussed. That's
an auction where the highest bidder wins, and how Ethereum and Bitcoin have
structured their fee markets. Ethereum is now off of that system because of EIP
1559.
Another important change Thursday is that the block size on
Ethereum is now variable. Previously, the amount of transactions that can fit
inside one block was fixed, meaning users had to wait sometimes for their
transactions to be processed when there was high network demand. Blocks can now
grow or shrink to match the amount of incoming transactions.
“Now it gets much easier to send a transaction that will get
included in the next block and that's very important to user experience,”
Buterin said.
© Bloomberg LP