Ethereum upgrade prepares the blockchain for big energy-saving change next year, founder says
- Ethereum’s major London hard fork makes transaction fees more predictable and prepares the network to upgrade to version 2.0 as soon as year end
- The blockchain is moving to proof-of-stake mining, which is much more energy efficient than the proof of work model it currently uses, along with bitcoin
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 US$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.
“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”.
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 per cent 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.
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.
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“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.