Introduction
This article is going to discuss the upgrades of ETHv1.0, more specifically meaning the ETHv1.x updates and how this is going affect the price in the coming months. Ethereum 1.x is a codename for a comprehensive set of upgrades to the Ethereum mainnet intended for near-term adoption. It should be noted that ETHv2.0 (code name Serenity) won't be fully rolled out for another 2-3 years with Phase 0 and Phase 1 due within 1-2 and Phase 2 due sometime in 2022 [1]. So in the short term, as far as the asset price is concerned , there is not point looking into ETHv2.0. ETHv2.0 is being deployed as a separate blockchain so it does not supersede ETH 1.0 which means the chain needs to be sustainable for another 5-10 years [1]. In a few words ETHv1.0 is here to stay for now.
Ethereum 2021 Roadmap Outlook
Back in 2020 Vitalik Buterin tweeted a personal roadmap of Ethereum [3]. Below we can see the image posted by Vitalik.
If we focus in the recently announced EIP 1559 upgrade we can see below the upgrade paths:
As we can see above the promised recent upgrade is related to EIP 1559, which will help ETH 1.x to optimise security, privacy and scalability.
EIP 1559 Upgrade
In simple words the EIP 1559 is a transaction pricing mechanism that includes fixed-per-block network fee that is burned and dynamically expands/contracts block sizes to deal with transient congestion [4]. EIP 1559 essentially resolves a pending problem in the Ethereum blockchain, which is the inaccuracy of gas fee estimates, which results into a fee volatility [5].
Ethereum historically priced transaction fees using a simple auction mechanism, where users send transactions with bids ("gasprices") and miners choose transactions with the highest bids, and transactions that get included pay the bid that they specify. This is a problem due to the fact that miners have an excessive control over the fees and therefore ETH v1.0 becomes too expensive (because the miners want more fees) [4].
Important information: The EIP 1559 upgrade will not reduce the fees significantly, but it will decrease the price volatility. And therefore the ETH price is not going to be affected positively from the upgrade.
The Berlin upgrade
The Berlin upgrade for the Ethereum (ETH) blockchain network is now ready to be deployed. More specifically the complete release schedule is shown below:
- Ropsten: Block #9,812,189 — expected 10 Mar 2021
- Goerli: Block #4,460,644 — expected 17 Mar 2021
- Rinkeby: Block #8,290,928 — expected 24 Mar 2021
- Mainnet: Block #12,244,000 — expected 14 Apr 2021
The Berlin upgrade introduces several different EIPs to the Ethereum (ETH) blockchain network.
- EIP 2929: Gas cost increases for state access opcodes
- EIP 2718: Typed Transaction Envelope
- EIP 2930: Optional access lists
Note: EIP-1559 is “NOT in this network upgrade and is slated for later this year.”
Important information: None of the upgrades listed above is related to any significant fee reduction. And therefore the ETH price is not going to be affected positively from the upgrade.
Optimistic Rollups
Optimistic Rollups (ORs) are one type of layer 2 constructions that do not run on Ethereum's base layer but on top of it (meaning this is a layer 2 solution and not an actual upgrade on the ETH 1.x mainnet). This enables running smart contracts at scale while still being secured by Ethereum. Any user that uses a Dapp that is deployed to a layer 2 with an ORs construction can enjoy economic abstraction (eg: fee-free transactions, pay with ERC-20, etc.) and instant transactions [6]. ORs aims to decrease the high transaction fees by orders of magnitude and support scaling by taking computational demands off ETH 1.x chain [7].
Important information: This upgrade is related to a potentially significant fee reduction. And therefore the ETH price IS going to be affected positively from the upgrade.
This type of solution, simplistically talking, is implemented already by numerous other tokens e.g. Matic, unipig.
EIP-3368 Increase Of Block Rewards
EIP-3368 essentially changes the block reward paid to proof-of-work (POW) miners to 3 ETH from existing 2 ETH and starts a decay schedule for next two years to 1 ETH Block Reward. Set the block reward to 3 ETH and then decrease it slightly every block for 4,724,000 blocks (approximately 2 years) until it reaches 1 ETH [8].
Important information: None of the upgrades listed above are related to any significant fee reduction. And therefore the ETH price is not going to be affected directly positively from the upgrade. BUT this upgrade keeps happy the miners and therefore, it seems that the miner pools will stop dumping ETH after the upgrade is agreed by the dev and miner community.
Critical Update
For more information see the videos below sequentially, and you will understand the opportunity cost loss for holding ETH:
More Info
For more info see:
References
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