London upgrade is just around the corner. Which game rules have been changed?

The Ethereum London upgrade is approaching, with only one week left until August 5.

On July 15th, the Ethereum Foundation issued a formal announcement on the London upgrade. After announcing the successful deployment of the testnet, the London upgrade is fully ready to be activated on the Ethereum mainnet. It will be launched at block 1,2965,000, which is expected to be on August 5. Previously, all three testnets of Ethereum have successfully activated the London upgrade. The Ethereum testnet, Ropsten, was the first to be successfully activated. The London upgrade was activated at block height 10499401 at 10:3 on June 24th; followed by Goerli at block height 5062605 at 11:19 on July 1st; Rinkeby The London upgrade was activated at block height 8897988 at 1:27 a.m. on July 8. Kovan, the testnet, will be upgraded after the Ethereum mainnet is upgraded.

The official also pointed out that in order to be compatible with the London upgrade, node operators need to upgrade the client version they are running. After the London upgrade, the OpenEthereum client will be abandoned, and the way to deal with target gas restrictions on the network will be changed.

What is the significance of the London upgrade?

As the most important network upgrade before the advent of Ethereum 2.0, the London upgrade has attracted much attention because of EIP-1559 and has also caused a lot of controversy. Among them, the London upgrade includes 5 EIPs, EIP-1559, EIP-3198, EIP-3529, EIP-3541 and EIP-3554. Each EIP contains code changes aimed at optimizing and improving Ethereum.

The London upgrade is mainly aimed at optimizing and improving the network performance of Ethereum, reducing high Gas fees, reducing network congestion, improving network stability, improving user experience, and bringing new opportunities and new opportunities to the current booming DeFi ecosystem on Ethereum world.

EIP-1559: Revolutionizing the Ethereum 1.0 fee market

Among all EIP upgrades in London, EIP-1559 has become the most controversial EIP due to its redesign of the Ethereum network fee market. Regarding the comprehensive interpretation of EIP-1559, you can review the previous article of the ostrich blockchain “Why does EIP-1559 make the market so excited?” Comprehensive comprehension.”

Controversial existence, as well as the code change project, before the Ethereum community members also broke the news that EIP-1559 may be postponed to 2022, because most of the core developers of Ethereum reported that there are still a large number of unresolved problems. But rumors have been rejected, EIP-1559 does have a BUG, ​​but it is indeed overwhelming.

Ethereum has historically used a simple auction mechanism to price transaction fees, which is causing Ethereum’s inefficiency. The mismatch between the volatility of the transaction fee level and the social cost of the transaction, unnecessary delays for users, the inefficiency of the first price auction, and the instability of the blockchain without block rewards are all urging changes in the fee market. .

After EIP-1559 is activated, miners can only keep tips and the basic fees are directly destroyed. This ensures that only ETH can be used to pay for transactions on Ethereum, consolidate the economic value of ETH in the Ethereum platform, and reduce the value that can be withdrawn from miners ( MEV) related risks. In addition, this destruction mechanism offsets Ethereum’s inflation while still providing block rewards and priority fees for miners.

This destruction mechanism is similar to the introduction of a supply cap to ETH, which suppresses the growth of the total supply by removing a variable amount of ETH from circulation for destruction every time a transaction is executed. Simulations as of June 8 show that activating EIP-1559 in the past year will burn a total of 2,967,937 ETH, and during this period the ETH supply growth has decreased by 76%.

The attitude towards EIP-1559 can be described as a two-level separation. The reason why it will be opposed is that EIP-1559 will reduce the income of Ethereum miners. All previous transaction income belongs to miners. After EIP-1559 is activated, miners Income is split into basic fees and tips. This split itself will not affect the ability of Ethereum to process blocks or calculations, but this may face various unfavorable conditions, such as miners leaving, disrupting the network, or opening a competitive chain. If a large number of Ethereum miners leave or destroy, the block time and network security will be affected.

At the same time, for users and developers, the advantages of EIP-1559 may not be as significant in practice as in theory. Failure to fulfill the promised fee market efficiency may lead to disillusionment of users and developers. If this happens, Ethereum’s market share is likely to be seized by other competitors. Essentially, EIP-1559 aims to reduce the volatility and predictability of transaction fees on Ethereum, but code changes will inevitably bring potential risks and rewards to Ethereum, which also needs to be taken seriously after activation .

EIP-3198: Add BASEFEE opcode

EIP-3198 is called the sister proposal of EIP-1559 by the outside world. EIP-3198 adds the BASEFEE opcode, the purpose is to return the basic cost of the current block, extend the user experience improvement of EIP-1559 to smart contracts, and use smart contracts at the same time The transaction will no longer be charged.

EIP-3529: Reduce Gas Refunds

Although the EIP-3529 proposal has not been mentioned much, its impact on the Ethereum network cannot be ignored either. Gas refunds have a variety of undesirable consequences. Refunds generate GasToken and increase the difference in block size. EIP-3529 cancels the original Gas Tokens mechanism to make the network more stable. At the same time, the original Gas Tokens on Ethereum will become invalid. For holders of the original Gas Tokens, the Gas Tokens on hand need to be consumed before the upgrade, otherwise, after the upgrade, the Gas Tokens on hand will be unusable and no longer have hype value.

EIP-3541: Reject new addresses beginning with the 0xEF byte

EIP-3541 is mainly for developers, rejecting new addresses beginning with 0xEF bytes, but the original addresses are not affected. Lay the foundation for future updates of Ethereum, prepare for subsequent EVM upgrades, and ensure that subsequent upgrades are compatible with existing contracts.

EIP-3554: Delay the difficulty bomb until December 2021

EIP-3554 mainly involves the delay of the difficulty bomb time, which is tentatively postponed to December 1, 2021. The purpose of the difficulty bomb is to increase the difficulty of mining, make it more and more difficult to generate PoW blocks, and then transfer the consensus to the PoS chain. Above, the postponement also means that Ethereum miners can continue mining.

The inclusion of the difficulty bomb means that Ethereum is ready to transition from PoW to PoS. After the difficulty bomb is included, the difficulty of Ethereum PoW mining will gradually increase. With the increase in the difficulty of subsequent PoW chain mining, the miners gradually abandoned mining due to high costs and low profits, and the PoW chain was finally abandoned, thus completing the smooth transition of Ethereum from PoW to PoS.

What do users/miners need to do?

If you only use the exchange or wallet service, the user does not need to take any action unless the exchange or wallet informs you to take other steps. If you run your own Ethereum node, you need to upgrade the node.

As a miner, you first need to update the Ethereum client, and you need to manually change the Gas limit target to the current double, because once the London upgrade is completed, the block size will double, and EIP-1559 will keep the block at about 50% Capacity, this can be done on all clients that provide mainnet compatible mining through JSON-RPC, without restarting the node.

If the miner or node operator does not update the Ethereum client to the latest version, once the London upgrade is completed, its client will be synchronized to the pre-fork blockchain and will be trapped on an incompatible chain according to the old rules , You will not be able to send ETH or operate on the upgraded Ethereum network.

The upgrade is imminent, what’s the situation on the chain?

The London upgrade time is approaching, whether it is the price of ETH or related data on the Ethereum chain, attention is increasing. The price of ETH has shown an upward trend for nearly a week in a row, but this does not seem to be a positive stimulus from the London upgrade. It is more about following the trend of the broader market. There is still a week away. Maybe ETH will be affected by the London upgrade and get out of the independent market, but it can lead. The overall market trend is improving, and the difficulty may be increasing.

On-chain data seems to have more positive response. According to Glassnode data, ETH holders are actively transferring their tokens from centralized exchanges, and the amount of ETH locked in smart contracts is increasing. This means that holders will not sell ETH in the short term. According to the data of the masters on the Ouke Cloud Chain, as of July 27, the Ethereum 2.0 deposit contract address has received 6,421,600 ETH. According to the current circulation of 116 million Ethereum, the amount of pledged Ethereum accounts for the total supply. 5.53% of the total, 65,984 ETH has been pledged in the past week.

The bull market promoted by DeFi, after the upgrade in London and the activation of EIP-1559, the change in the cost market will inevitably drive the turbulence of the DeFi ecosystem. Whether it can become the next rising point in the market, the market will soon give an answer.

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