Ether (ETH) has recently suffered a tear, with the value of the major altcoin climbing from $ 1,800 to its peak of $ 2,480 since the beginning of April, showing a growth of nearly 30%. This latest wave of monetary momentum comes in the wake of Ethereum, which has been widely criticized for rising network congestion and transaction costs.
To put things in perspective, since the second half of February, the average cost of facilitating transactions on the Ethereum ecosystem has continued to hover above the $ 16– $ 20 range, making it quite impractical for individuals conducting smaller transactions. want to facilitate to use the platform. In fact, on Feb. 23, the aforementioned fee value skyrocketed to a record high of $ 42, drawing the ire of the crypto community at large.
The Ethereum network recently underwent a hard fork labeled ‘Berlin’, which in its most basic sense can be seen as a network upgrade with four Ethereum enhancement proposals aiming to change the gas requirements of the ecosystem and certain new transaction types.
The Berlin update appears to be laying the groundwork for the much larger London hard fork, which will trigger EIP-1559: a long-awaited, if controversial, overhaul of Ethereum’s existing fee structure.
Will EIP-1559 solve all of Ethereum’s problems?
While the upcoming London hard fork promises big things on paper, it’s still pretty pertinent to delve into whether EIP-1559 will be the long-term solution Ethereum needs to solve its scalability problems for good.
Cointelegraph spoke to Abdelhamid Bakhta, one of the six primary authors of EIP-1559. He pointed out that there is currently a lot of misinformation and half-baked knowledge floating around the web regarding London’s upcoming upgrade.
To begin with, Bakhta clarified that reducing the current congestion and high fees is not the goal of EIP-1559, but rather wants to introduce the concept of “block elasticity”, which means doubling the theoretical maximum capacity of the platform. He further added:
“Transaction costs are a function of supply and demand. And, technically, there is no increase in the average block space available because the base rate mechanism is designed to reach half the maximum block capacity. So the short answer is no, the upgrade will NOT be the long-term solution that Ethereum needs to fix the scalability issues. “
In a more optimistic tone, however, he added that as more and more layer two solutions are adopted, all problems with network costs and congestion will eventually be resolved.
As to the fact that miners are not satisfied with the proposed cut in their pay ratios by 50% after the implementation of the London hard fork, Bakhta felt that it is quite clear why some of the miners are against the proposal. “Along with gas fees that have reached their highest level in years, Ethereum mining has become a wholly owned business itself,” he added.
However, he stated that miners already knew their business would end when Ethereum finally moved to a proof-of-stake framework, adding that while he understands this cut is hard to accept, the change was inevitable. Bakhta further noted, “It’s not like they were unaware of this proposal. The idea was first introduced by Vitalik in an article entitled ‘First and Second Price Auctions and Enhanced Transaction Cost Markets’ in July 2018. ”
Layer-two solutions are the need of the hour
Jan Strandberg, co-founder and chief growth officer of DeFi platform Yield App, shared his thoughts on how the upcoming EIP-1559 will help the Ethereum ecosystem. and DeFi merchants who are tired of high gas costs and long wait times, it is a short-term solution to Ethereum’s overarching problems.
According to him, a real breakthrough will only happen when Eth2 finally goes live, allowing the network to scale its transaction capabilities from 15 transactions to 100,000 transactions per second. He added, “This is going to be the real game changer – not just for Ethereum, or even DeFi, but probably for all cryptocurrency. It will pave the way for true widespread adoption. “Therefore, it appears that the upcoming hard fork in London will fundamentally change only the peripheral economy of Ethereum, without having a significant effect on scalability.
Anton Bukov, co-founder of DEX aggregator 1inch Network, told Cointelegraph that he will be surprised if the upcoming London hard fork goes live even before September. In terms of Ethereum’s scalability issues, he agrees that instead of looking to EIP-1559 as an ultimate solution, users should focus their vision on layer two solutions, adding:
“I am very inspired by Matter Labs’ zkPorter, who should help Ethereum achieve 20K TPS. Can’t wait to see Ethereum switch to PoS so ETH holders can manage network upgrades. “
Potential risks associated with EIP-1559
Speaking of some of the possible gray areas associated with EIP-1559, Bakhta felt that, as things stand, the Ethereum developer team appears to have hedged all potential risks associated with the aforementioned proposal. He explained:
“There were two main aspects to consider: the economic analysis and the impact on performance. The purpose of the economic analysis was to determine whether the new market model was secure and not vulnerable to attack. In terms of performance, there were some concerns about whether or not the network could handle twice the size of blocks. And the answer is yes. “
On a more technical note, Bakhta stressed that the team has successfully been able to process blocks nearly four times the size of the mainnet – even more than what EIP-1559 suggested – and added, “EIP-1559 was a fantastic journey. for me. It was great to see the collaboration between all the teams, researchers, authors, economists. This is my personal greatest achievement. “
Strandberg believes Eth2 is what it all boils down to. “When Eth2 comes, we will see something really special that is well worth the wait,” he added. A crypto-economic network such as Ethereum must constantly balance the security budget needed to keep its system safe and what miners charge (over) costs. Additionally, after gas prices have recently risen significantly on the Ethereum network, EIP-1559 comes across as an overdue correction in favor of Ethereum’s ever-growing user base.