HERE’S WHAT ETHEREUM’S PRICE WILL LOOK LIKE AFTER ‘THE MERGE’

Here are the issues Ethereum Core devs are working on before London

The much-anticipated London upgrade to the Ethereum network, one designed to change the controversial Ethereum fee structure, is on track to launch on 4 August. As part of the London hard fork, Tim Beiko, the lead coordinator of several Ethereum upgrades, along with other core developers, recently provided a recap of the developments around the upcoming hard fork.

The meeting kicked off by highlighting Goerli & Rinkeby Forks. For the former (Goerli), the two developers, Marius VanDerWijden (@vdWijden) and another developer from @ConsenSysQuoru within the Ethereum space, “...spammed the network before the fork block and after it to make sure things went smoothly, which they did.”

While for the latter, the Go Ethereum team discovered a small setback in their validator configurations. “The minimum gas price that miners/validators accept in Geth is 1 gwei and post-London this is calculated with the priority fee instead,” the recap noted.

Due to this, however, “A lot of transactions were stuck because they had a 1 gwei max priority fee + max fee, and the network had a base fee of 7 gwei, so the priority fee received by validators was 0.999999993 gwei, not 1.”

According to the developers, this problem was solved by lowering the benchmarks set by validators.

Additionally, different clients also agreed with a deployment block of 12965000 for the mainnet.

Another issue that was discussed during the meeting revolved around the storage of gas price paid by the user. As things stand, both fields in 1559-style transactions include maximum fees (max fee + max priority fee). Again, to overcome this obstacle, the team has now added an ‘effectiveGasPrice’ in the transaction receipt to only incorporate the price paid after the execution of the transaction (base fee + priority fee).

On the back of these updates, Beiko also had an update for the network’s miners.

Moving on, the discussion also shed some light on clients handling the non-consensus parts of 1559 as well, specifically transaction pool sorting and transaction replacement. While most of the clients used a similar design for the pool, for the latter, two different approaches were used. Both very similar, “but with different interpretations.”

A major Ethereum upgrade doesn’t seem important enough unless it has been met with a delay. Keeping up with tradition, ETH’s London hard fork is now expected to launch on 4 August.

The fork is expected to take place at block 12,965,000 and there has been a mixed bag of responses from Ether enthusiasts. While some are excited about an official release date, others are a little more skeptical and cautious.

Now, there have been successful activations on the Ropsten, Goerli, and Rinkeby testnets, with most of the hype still around EIP 1559. However, there are a few other EIPs that are crucial as well, right before ‘the Merge,’ EIPs that are also part of London. But, more on that later in the article.

Ethereum: Meet the EIPs

The London hard fork will include four other Ethereum Improvement Proposals (EIPs) other than EIP 1559, namely,

EIP 3554

EIP 3198

EIP 3529

EIP 3541

Without getting into the nitty-gritty technicals, each EIP constitutes an important part of Ethereum’s eventual shift to the Proof-of-Stake network.

EIP 3554 is responsible for a difficult bomb delay until 1 December. This update has been included keeping the miners in mind as it would increase the difficulty of mining on the Ethereum network until the network can prepare itself for the Merge.

EIP 3198 would give EVM access to the block’s base fee on the new PoS system and EIP 3529 removes and reduces gas fee refunds. Finally, EIP 3541 would be rejecting smart contracts based on the old 0xEF byte, and that code will no longer be deployable on the PoS blockchain.

EIP 1559, obviously, remains the most important upgrade, as it would introduce a base fee and fee burning mechanisms which would eventually make Ethereum a deflationary asset.

Now, these EIPs come into the complete picture when we include the plot of the Merge.

What is “The Merge”?

Now, the merge is one of the main core upgrades that is expected to evolve and change ETH’s network and monetary policy. The merge is basically the current Ethereum mainnet merging with the current beacon chain proof-of-stake system. The merge will commence the transition to PoS when miners will not have anything to mine in the space.

With the completion of the Merge, Ethereum’s price action may undergo a severe change from a demand perspective. Now, miners will be out of business, so they will possibly make a switch from mining to validating post-merge. For validator node operators actively running software on ETH 2.0 today, their estimated annual percentage return (APR) for a single 32 ETH deposit is between 6% and 7%. That might not be lucrative enough for some miners.

So, for the price, there are a couple of scenarios.

Ethereum will strongly undergo network discovery, as a transition is unlikely to be silky smooth and during that time, the price will be more volatile than ever.

Considering the burning mechanism takes in the speculated effect, ETH’s price will rise strongly during the initial days of the network shift, and the supply will reduce consistently.

On the flip side, if there are problems with the staking model and validators start exiting the network after their holdup period is over, the price will negatively decline, and possibly undergo stagnancy.

Ethereum’s frequent change of roadmaps does raise the question of whether it can ever match Bitcoin’s rigidity and Store-of-Value credentials. With the London hard fork, we are entering a massive development phase for Ether, one which will be defined by excitement and massive uncertainty.