The crypto world is braced for the impact of a huge and potentially epochal event: the Ethereum London Hard Fork.
On Thursday, August 5th at about midday UTC, a code update called EIP-1559 will change the way transactions fees work on the Ethereum blockchain.
The price of Ether has been riding high for the past month ahead of the fork, although it dipped slightly today to just under $2,700.
The Ether “12-day winning streak” is its longest ever on record, the data science company IntoTheBlock tweeted.
“$ETH is sitting on strong support while facing the last 2 key levels of on-chain resistance on its path to $3k once again,” it added.
“Between $2,598 and $2,753, 1.19m addresses bought 2.03m ETH.”
No one really knows what the effect of this change will be, although that hasn’t stopped analysts from making wildly varying predictions about the implications of the fork.
Simon Dedic, the managing partner at Moonrock Capital, said the update would be “deflationary” and tweeted: “Today’s dip = Blessing.”
What Is the London Hard Fork?
The EIP-1559 upgrade will change the rules around transaction fees and how they are handled by the Ethereum network.
Ethereum currently uses an auction system in which users of the network bid against each other to have transactions processed by miners, with the fees that are levied tending to be higher at busy periods and lower during quieter times.
The update introduces a basic transaction fee which will be decided automatically by algorithms depending on how much demand there is on the network. Users will be able to offer tips to miners, encouraging them to process the transactions more quickly.
Part of the fee will be “burned”, which means it will be destroyed. This is expected to limit the total supply of Ethereum and could have a deflationary effect that stops prices from shooting upwards. Unlike Bitcoin, there is no limit on the amount of Ether that can be produced.
The London hard fork will take place at block number 12,965,000, which is predicted to happen at 11.55 UTC on August 5th.
Binance issued two predictions about the fork and will temporarily cease the trade of Ether just before the update. The first scenario would involve no new tokens being created, which means that business will continue more or less as usual.
The second scenario is more dramatic.
“The chain splits into two competing chains and a new token is created,” the exchange wrote.
If this comes to pass, Binance will credit users with ETH from the chain with the most work done.
Some analysts are hoping that the fork will cause prices to surge upwards
Greg Waisman, co-founder of global payment network Mercuryo, said: “The highly anticipated Ethereum London hard fork event will expose users to a more flexible and cheaper fee structure and introduce a mild burn effect, billed to make ether deflationary.
“The coin has trailed an uptrend from the weekend, and we may see this brewing positive sentiment over the coin shoot its price to $3,000 in the coming days/weeks following the update.”