Ethereum’s ‘London Upgrade’ and Investor Benefits Explained

Bitcoin has been the undisputed market leader since the cryptocurrency wave swept the world. While Ethereum has long been the sole challenger to the world’s largest cryptocurrency, its technology suffered from several issues that held it back. Little by little, the gap widened between them. To overcome the challenges that Ethereum faces, its developers have now released an upgrade. Colloquially referred to as the ‘London Upgrade’, it rallied the cryptocurrency market. Investors seem optimistic about this as it brings more transparency in terms of transaction fees on the network. Some experts predict that the latest changes to Ethereum technology in a long time could end Bitcoin’s dominance.

Many people confuse Ether with Ethereum. So, let’s tackle that first.

Ethereum and Ether

Ethereum is a technology that uses blockchain technology to facilitate peer-to-peer contracts. Unlike traditional contracts, written in human languages, these smart contracts are written in codes that a computer can execute. The Ethereum network acts as a single decentralized computer that executes the code, which means that all computers on the network will agree with the outcome of each smart contract.

To make the network work, developers need some kind of “gas”. Ether is the cryptocurrency coin that serves as its fuel. It is used to pay for transaction fees and calculation services. When people send or receive smart contracts, computers are required to validate those transactions. Ether is born by successful validation, the process is called mining. Simply, Ether is the native currency and Ethereum is the technology that produces it. But the word Ethereum is also used casually to refer to currency. People can mine ether or buy the ones that are already mined from an online exchange. The price of Bitcoin in India was around Rs. 35.3 lakhs and the price of Ethereum in India was around Rs. 2.47 lakhs at 6pm IST on August 13th.

What is the new Ethereum upgrade?

The Ethereum London Hard Fork upgrade is a set of five improvement proposals. One of them is called EIP-1559. It aims to speed up the extraction of ether and encourage it. Unlike Bitcoin, there is no limit to mining Ether coins, making it an inflationary cryptocurrency. Miners receive new coins to validate each block of information. They are compensated by transaction fees paid by users. One of the main benefits of the London upgrade is that it allowed the Ethereum network to handle significantly more transactions per second. This will help with scalability and tackle high transaction fees – one of the biggest complaints from small investors or those who trade frequently.

Reduction in the number of Ether coins in circulation

Another great feature of the EIP-1559 upgrade is that it is designed to reduce the number of Ether coins in circulation at any given time. This could potentially result in higher prices, assuming demand remains constant. This upgrade will make Ether a deflationary cryptocurrency like Bitcoin, whose supply has already been limited to 21 million coins. This means that over time their purchasing power will increase.

What does a hard fork mean?

When the majority of a cryptocurrency community, comprising developers, miners, and investors, decide to change the fundamental rules governing the underlying technology, a hard fork occurs.

What does the Ethereum upgrade mean for investors?

Ether is one of the fastest growing cryptocurrencies and is second only to Bitcoin. But the gap between them is in the thousands of dollars. This update will create more transparency and therefore more confidence in the future of this coin as a store of value, which should translate into attracting more investors. As the demand increases, the price will also increase. Many experts believe the latest upgrade gave Ethereum the firepower to challenge Bitcoin, which has shown immense volatility in the recent past.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting Founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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