Ethereum hard fork explained: what is the London hard fork?

The Ethereum hard fork has attracted a lot of attention, but what is it?

Contents

The Ethereum blockchain has just had a massive upgrade in the form of the so-called London hard fork. This has had an impact in the world of crypto, not least on ether, the world’s second largest cryptocurrency. Read on for more information about the Ethereum hard fork update, how ether has responded to the change in the protocol, how the crypto market responded overall, and how Ethereum could be used by one of the world’s biggest companies.

Hard fork explained

A hard fork is a process whereby a blockchain makes all the transactions it had previously considered valid to be invalid and all the transactions it had previously considered invalid to be valid. It is, in effect, an unchangeable permanent modification on the blockchain.  When a hard fork is put into place, users have to download and install an updated version of the software. However, the old version of the blockchain still exists, which can potentially lead to a new cryptocurrency.

This is what makes it differ from a soft fork, which changes the protocol and, in effect, erases the original version. Hard forks can be initiated as a way to counteract bugs, stop hackers stealing crypto, or simply as a way to make the network more efficient. They can be controversial, though. One reason is that miners have to change the way they work in order to get hold of the crypto. In addition, people who hold the coin that is being hard forked might not want to have the newer version.

Hard fork infographic
Credit: Currency.com

If you were thinking: “Has there not already been an Ethereum hard fork,” the answer is yes. 

Ethereum’s previous hard fork

The DAO, short for decentralised autonomous organisation, was a platform set up in 2016 that allowed people to promote and, crucially, raise money for their start-up apps. You had to buy DAO tokens with Ether to enter, votes would be held on whether or not to fund something, and apps which had 20% or more support got a share of the investment. A Split Function was created to allow people to withdraw their support for a project and get their Ether back after a 28-day waiting period. Unfortunately, there was a flaw in the Split Function’s code. This meant the network kept refunding the same tokens without anything popping up on the public register.

Although not all was lost, the fact that the network was based around Ethereum meant it took a significant reputational hit. Investors were polled, and the majority decided to set up the first Ethereum hard fork, which meant all ether coins issued after a certain date would, in effect, be invalid. People got refunds and everyone was happy.

Well, everyone except for a substantial number of investors, who saw no need to go to such extreme lengths and have an ETH hard fork. These people, in effect, kept the original blockchain that had been split off by the Ethereum hard fork and rebranded it as Ethereum Classic. This is why there are two cryptos with very similar names that do pretty much the same thing. It might also explain why ether going off in a new Ethereum hard fork in August 2021 was not quite as controversial as it otherwise could have been.  

What is the Ethereum hard fork?

To answer the question “what is Ethereum hard fork?”, for quite some time now the Ethereum blockchain, like many blockchains, has had issues with scalability. This means that there can be problems with making transactions quickly and efficiently. Things were not working quite as well as they could have been, which meant actions on the chain were taking longer to carry out than users would have liked. The issue with scalability also meant that transaction fees were higher than they should have been, which also made users unhappy. After all, one of the key theories behind blockchain technology, especially the decentralised finance behind Ethereum, is that it is meant to make carrying out financial transactions easier, rather than harder. It also did not help that the transaction fees were unpredictable, which meant you never quite knew what you were going to have to pay at any one time. 

What is your sentiment on ETH/EUR?

1689.17
Bullish
or
Bearish
Vote to see community's results!

The Ethereum hard fork aimed to make things easier, by changing its method from proof-of-work to proof-of-stake. Under the old system, coin mining was a data and energy-intensive process, which led to delays in the system and higher transaction fees. It also used a lot of electricity, which is expensive and ultimately bad for the environment. The Ethereum hard fork means people are able to mine coins based on how many coins they own. This reduces the need for energy and means transactions should be quicker and, crucially, cheaper. 

That is the Ethereum hard fork explained. It’s also known as the London hard fork, and Ethereum Improvement Protocol 1559 (EIP-1559). It went live early in August 2021, with the Ethereum hard fork date of 5 August hit successfully.

What happened after Ethereum hard fork? Let’s take a look. 

ETH/USD price history

Date Close Change Change(%) Open High Low
May 26, 2022 1939.71 -0.87 -0.04% 1940.58 1964.33 1931.21
May 25, 2022 1940.56 -36.63 -1.85% 1977.19 2019.96 1931.87
May 24, 2022 1977.27 6.72 0.34% 1970.55 1991.54 1909.54
May 23, 2022 1970.52 -70.27 -3.44% 2040.79 2087.20 1954.08
May 22, 2022 2040.91 68.40 3.47% 1972.51 2055.25 1963.23
May 21, 2022 1972.56 15.64 0.80% 1956.92 1988.47 1935.49
May 20, 2022 1956.86 -60.70 -3.01% 2017.56 2062.13 1920.65
May 19, 2022 2017.62 105.44 5.51% 1912.18 2038.40 1900.72
May 18, 2022 1912.30 -176.07 -8.43% 2088.37 2109.02 1905.38
May 17, 2022 2088.36 68.32 3.38% 2020.04 2120.58 2005.74
May 16, 2022 2019.99 -122.82 -5.73% 2142.81 2142.81 1975.91
May 15, 2022 2142.92 90.14 4.39% 2052.78 2152.68 1997.01
May 14, 2022 2052.81 46.96 2.34% 2005.85 2066.03 1946.99
May 13, 2022 2005.82 52.44 2.68% 1953.38 2145.61 1934.35
May 12, 2022 1953.30 -122.84 -5.92% 2076.14 2185.33 1700.37
May 11, 2022 2075.94 -264.61 -11.31% 2340.55 2450.41 2000.19
May 10, 2022 2340.65 111.51 5.00% 2229.14 2455.87 2198.38
May 9, 2022 2229.44 -289.71 -11.50% 2519.15 2529.17 2224.31
May 8, 2022 2519.12 -115.93 -4.40% 2635.05 2641.43 2483.76
May 7, 2022 2635.12 -57.22 -2.13% 2692.34 2704.07 2586.54

After the hard fork

First, the Ethereum price went up after the hard fork. It had already been rising ahead of the ETH hard fork. The price stood at $2,557.77 at the start of 2 August and, on 7 August, it hit an intraday high of $3,170.23, an increase of just under a quarter in the space of five days. That same day, 7 August, was the first time ether had broken through the $3,000 barrier since the great day crypto crash of 19 May, when it fell by more than 40% from an intraday high of $3,437.94 to an intraday low of $1,952.46. The overall growth does not look like stopping at any point soon and, as of the morning on 17 August, the crypto stood at around $3,200. There were some storms on the horizon, though, and by the early afternoon on 19 August, it was back down to around $2,980. Although the coin did slump, it is still in a better position than it was at the start of the month. 

Second, the overall cryptocurrency market is looking better, worth more than $2trn on 14 August for the first time since the middle of May. While this may be a correction after recent lows, the fact that a lot of crypto tokens are based on the Ethereum blockchain may have created more confidence in the broader cryptocurrency market. 

Third, research from the tech giant Microsoft suggested that using an Ethereum-based system would help it counter piracy. This is important news for crypto as a whole, but it does suggest that Ethereum’s latest changes have generated some notable interest.

FAQs

A hard fork is a process whereby a blockchain makes all the transactions it had previously considered valid to be invalid and all the transactions it had previously considered invalid to be valid. It is, in effect, an unchangeable permanent modification on the blockchain. It keeps the original blockchain protocol, though.

A soft fork changes the protocol and erases the previous version, unlike the hard fork, which keeps the previous version.

How a hard fork affects price depends on the blockchain being forked. Sometimes it can renew confidence in the blockchain’s cryptocurrency but it can also put people off investing in it. Likewise, a currency based on the old blockchain can thrive and become successful, or it might also disappear into obscurity. There is no way to be 100% certain. Cryptocurrencies can be incredibly volatile, so always do your research, remember prices can go down as well as up, and never invest more money than you can afford to lose.

Ethereum to US Dollar
Daily change
1806.29
Low: 1806.29
High: 1964.52
Ethereum to Euro
Daily change
1686.24
Low: 1686.24
High: 1838.66

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image