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This week saw a 15% decrease in the price of Ethereum, with the alt momentarily falling to $1,651. Despite the altcoin’s price fluctuations, blockchain-related innovations have not slowed. In reality, the London update went live on the Ropsten testnet on June 24. Lead developer Time Beiko revealed the same when he tweeted about the first block being produced on the testnet.
“We have a block! Took a bit longer than expected, but London is live on Ropsten”
This upgrade followed Berlin and included the addition of EIP 1559, the EIP that has been vastly hailed for the modifications it will bring to the network and alter the transaction fee calculation mechanisms. However, EIP-1559 is no just about impacting transaction fees.
With the long-awaited and contentious protocol update now being implemented on the testnet, it’s worth taking a look at what it involves, particularly what changes, apart from fees, it will bring.
While the lowering of fees has been one of the protocol’s most talked-about characteristics, there are other benefits for the network as well, such as improved security, altering incentives for short-term reorganisations, and shattering economic abstraction.
Preventing DOS attacks
According to a Twitter thread by Evan Van Ness, a popular crypto-blogger, EIP 1559 is an “important *security* upgrade.” While the Berlin upgrade was an important step in thwarting DOS attacks on Ethereum, 1559 will be a crucial, long-term step to prevent DOS attacks, as per Ness. Under the 1559 protocol change, it will become more expensive for users to spam the chain while shorting to make a profit. This will be a huge benefit for the network as it would make it hard to spam attach the Ethereum blockchain.
Adoption of Layer 2
Mining pools now provide payments to miners at a $0 gas price. To circumvent this, miners will have to burn half of the basic fee per protocol 1559. Instead, mining pools will be incentivized to utilise layer 2 or a sidechain. The protocol will help save up block space and encourage the use of layer 2.
Short-term reorgs to note fewer incentives
Miners can provide some disincentives for chain stability, but with 1559, the ratio of block rewards to transaction fees will shift. As a result, the incentives for front-running trades are reduced.
Even though EIP-1559 may result in negative issuance, it will exert significant upward pressure on Ether’s fiat price, according to Ness.
EIP-1559 is now only a few weeks away from entering the mainnet. The update will improve the user experience by making transaction costs predictable. This will, however, be dependent on the performance reported on the testnets. The deployment on the Goerli testnet on June 30th will be the next step towards the complete rollout of the London hard fork, followed by Rinkeby testent, which will be the last testnet. The final London hard fork for the mainnet is scheduled for later in July.