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, the technology has suffered from several issues holding it back. Gradually, the gap between them has widened. To meet the challenges of Ethereum, the developers have now released an upgrade. Popularly referred to as the “London upgrade”, it has kick-started the cryptocurrency market. Investors seem optimistic about it because it brings more transparency in terms of transaction costs on the network. Some experts predict that the latest changes in Ethereum technology could end Bitcoin’s dominance in a long time.
Many people get confused between Ether and Ethereum. So let’s get into that first.
Ethereum and Ether
Ethereum is a technology that uses blockchain technology to enable 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, meaning that all computers in the network agree on the outcome of each smart contract.
In order for the network to run, developers need some sort of “gas”. Ether is the cryptocurrency currency that acts as a fuel. It is used to pay transaction fees and computer services. When people send or receive smart contracts, computers are needed to validate those transactions. Ether is created by successful validation, the process is called mining. Simply put, Ether is the original currency and Ethereum is the technology that produces it. But the word Ethereum is also casually used to denote the currency. People can mine Ether or buy the ones that have already been mined through an online exchange. Bitcoin price in India was around Rs. 35.3 lakhs and Ethereum price in India was around Rs. 2.47 lakhs from 6pm IST on Aug 13.
What is the new Ethereum upgrade?
The Ethereum London Hard Fork upgrade is a set of five improvement proposals. One is called EIP-1559. It is meant to speed up Ether mining and also boost it. Unlike Bitcoin, there is no limit to mining Ether coins, making it an inflationary cryptocurrency. Miners are paid new coins for validating each block of information. They are offset with transaction fees paid by users. One of the biggest benefits of the London upgrade is that it will allow the Ethereum network to process far more transactions per second. It will help with scalability and address high transaction costs – one of the biggest complaints from retail investors or those who transact frequently.
Reducing 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 lead to higher prices, assuming demand remains constant. This upgrade makes Ether a deflationary cryptocurrency like Bitcoin, whose supply is already 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, made up of developers, miners, and investors, decides to change the fundamental rules for the underlying technology, a hard fork happens.
What does the Ethereum upgrade mean for investors?
Ether is one of the fastest growing cryptocurrencies and is only behind Bitcoin. But the gap between them is in the thousands of dollars. This update provides more transparency and therefore more confidence in the future of this currency as a store of value, which should translate into attracting more investors. When demand rises, so does price. Many experts believe that the latest upgrade has given Ethereum the firepower to challenge Bitcoin, which has shown immense volatility in the recent past.
