The upcoming Ethereum Berlin update, scheduled for Wednesday, April 14 will take the first steps in addressing Ether’s high transaction fees.
April 14, 2021 | AtoZ Markets – Today, April 14, the Berlin update will be launched on the Ethereum network at block 12244000. The previous major update, Istanbul, was done 15 months ago.
In anticipation of this event, the ETH rate is growing rapidly. The coin consolidated above the psychologically significant $2,000 mark and tested a new all-time high of $2,397 in morning trading on Wednesday, April 14. The staking volume on the Ethereum 2.0 network has exceeded $6 million.
Traffic, congestion, and gasoline
Since the beginning of the year, the decentralized finance (DeFi) and non-fungible token (NFT) sectors are on everyone’s lips.
Most DeFi and NFT projects are based on ERC20 and ERC710 tokens. and create additional load on the Ethereum network. As a result, transaction fees rise and processing speed drops. The web desperately needs to scale to meet user demands. This problem must be solved by “Berlin”.
In this version, the developers implemented improvements (EIP) aimed at reducing fees and simplifying the process of processing transactions.
Gas in the network is becoming more expensive for two reasons: an increase in the ETH rate and an avalanche demand for assets within the network.
At the end of February, one transaction had to pay an average of $40. It is very expensive. Since then, fees have almost halved, and still, for many developers and projects focused on small transactions, these are unaffordable amounts.
High commissions are a double bottom problem. First of all, they scare away users. The so-called “world computer” is useless if no one can afford to use it.
They also demotivate developers. Startups are looking for alternatives to Ethereum, fearing that users will not be willing to pay high fees. To maintain its status as the king of altcoins, ether needs to solve the problem of high fees.
The rise in popularity of NFT has made this issue even more acute. Traffic and congestion on the Ethereum blockchain are likely to remain an issue until some viable scaling is implemented.
The crypto community is eagerly awaiting an update that addresses these issues, but analysts are wondering if Berlin can effectively remove bottlenecks before moving to ETH2.
However, it is unclear whether the transition to Proof-of-Stake and ETH2 is worth waiting for. Meanwhile, other projects such as Cardano already have proof-of-stake networks with minimal transaction fees.
What is the Ethereum Berlin update?
The updated version will have four protocols. Each of them is aimed at solving some serious problem in the Ethereum ecosystem.
So, the following updates will be implemented in the April release:
- EIP-2565 = reduce the cost of pre-compiling ModExp. This will help to more accurately calculate gas prices.
- EIP-2929 = will “increase” certain gas costs when first used in a transaction.
- EIP-2718 = introduces a new module that will support multiple transactions.
- EIP-2930 = introduces transaction type with additional access lists. This EIP will help reduce gas prices associated with EIP-2929.
Node operators had to upgrade to versions compatible with Berlin by April 7, or they risk being left on the old network. Fortunately, regular users, wallets and exchanges won’t need to take any action. For them, the transition to Berlin will go unnoticed and automatically.
Platforms like Ethernodes are tracking exchanges, some have announced support for the new version. Although most of them did not react at all.
The Berlin update is another step towards the transition to Ethereum 2.0, which will change the consensus algorithm.
If miners now receive commissions for transactions, then in the new version they will be burned. This will lead to a reduction in the volume of emissions. This move caused a lot of controversy in the community, especially among the miners.
Particularly unpleasant for the mining community was the 50% drop in the Ethereum blockchain reward ratio. This is incredibly burdensome for the community members. In addition, miners play an important role in the operation of the blockchain. In order for Ethereum to continue to grow, it is necessary not only to attract new developers but also to ensure sustainable mining.
The well-known mining group SparkPool has publicly spoken out against the new EIP-1559 on Twitter. EIP-1559 is slated for release this July as part of the London update.
Berlin is a welcome update given the many challenges the chain has faced since Istanbul. However, demand for altcoins, NFT, and DeFi is skyrocketing, and it is unclear if it can improve transactions and gas prices.
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