"You'll see a shift among people looking to store wealth—they’ll use Ethereum instead of Bitcoin."
"As a newer token, Ethereum has progressed further than Bitcoin."
"The EIP-1559 upgrade will help Ethereum trade more like a fixed asset."
—Dan Morehead
On August 5, 2021, Ethereum’s core protocol underwent its most significant update to date—the London Hard Fork. This milestone introduced:
- Fairer gas fees via EIP-1559.
- A burn mechanism potentially pushing ETH into deflation.
- Critical steps toward Ethereum 2.0.
1. Ethereum London Upgrade: Key Details
At block height 12,965,000, the London Hard Fork activated five Ethereum Improvement Proposals (EIPs):
- EIP-1559: Overhauls gas fee structure.
- EIP-3198: Optimizes contract interactions.
- EIP-3529: Reduces gas refunds.
- EIP-3541: Prepares for future upgrades.
- EIP-3554: Delays the "Difficulty Bomb."
Adoption Status:
- 78% of nodes (1,254) completed the upgrade.
- Remaining 22% (354 nodes) pending updates.
Why This Upgrade Matters
- Controversy: EIP-1559 faced miner opposition due to reduced fee revenue.
- Delays: Originally slated for July 2021, postponed due to critical bugs.
- Progress: The penultimate upgrade before Ethereum’s shift to Proof-of-Stake (PoS).
2. EIP-1559: Revolutionizing Gas Fees
A. Transparent Fee Structure
Previously, users bid for transaction space, leading to:
- Sky-high fees during network congestion.
- Unpredictable costs for DeFi/NFT traders.
New Model:
- Base Fee: Algorithmically set by the protocol (burned).
- Priority Fee: Optional tip to miners for faster processing.
Result:
- More predictable pricing.
- Reduced fee volatility.
B. ETH Burn Mechanism
- Inflation Issue: No ETH supply cap (unlike Bitcoin’s 21M limit).
- Solution: EIP-1559 burns base fees, potentially making ETH deflationary.
Impact:
- If burn rate > block rewards, ETH supply decreases.
- Analysts project 4% annual supply reduction post-upgrade.
"EIP-1559 is Ethereum’s most significant upgrade since its launch."
—Meltem Demirors, CoinShares
3. Will Ethereum Become Deflationary?
Key Factors
- Current State: ETH has no hard cap (~120M circulating supply).
- Post-Upgrade: Burns could outweigh new ETH issuance.
Projections:
- Daily Burn: 25–75% of 13,000 newly minted ETH.
- Price Impact: Scarcity may drive ETH value higher.
👉 Learn how ETH scarcity affects DeFi
4. London Upgrade: Broader Implications
A. User Experience
- Simplified fee estimation.
- Fewer failed transactions.
B. DeFi & NFT Growth
- Stable fees benefit lending protocols and NFT marketplaces.
- ETH’s scarcity could bolster its role as collateral.
C. Miner Concerns
- Long-term revenue decline for miners.
- Transition to PoS may further reduce mining rewards.
D. Scalability Limits
- EIP-1559 doesn’t solve throughput issues.
- Layer-2 solutions (e.g., Rollups) remain critical.
5. FAQs
Q1: Does EIP-1559 reduce gas fees?
A: It stabilizes fees but doesn’t lower them during peak demand.
Q2: How does ETH burning work?
A: Base fees are permanently removed from circulation.
Q3: When is Ethereum’s next major upgrade?
A: The Shanghai Upgrade (October 2025) will finalize PoS transition.
Q4: Will miners become obsolete?
A: Post-merge, mining ends—validators replace miners.
Q5: Can ETH reach Bitcoin’s scarcity?
A: Possible if burn rates exceed issuance long-term.
6. Conclusion: A Step Toward Ethereum 2.0
The London Upgrade marks a pivotal shift for Ethereum:
✅ Fairer fee model.
✅ Potential deflationary ETH.
✅ Momentum toward scalability and sustainability.
Next Stop: The Shanghai Upgrade (October 2025) will complete Ethereum’s merge with ETH 2.0, unlocking:
- ~100,000 TPS (vs. ~30 TPS currently).
- 99% lower energy use.
Ethereum’s evolution as the "world computer" continues—stay tuned for the next chapter.