The cryptocurrency community is buzzing about the long-awaited launch of the ‘London hard fork’, or Ethereum EIP-1559, which is expected to make huge changes in the gas fee model of the blockchain. This is one of the major steps the blockchain is taking to improve scalability and latency problems that have affected the users in the past half-decade or so.
Despite the improvements, the EIP-1559 implementation only partly solves one of the major issues Ethereum users have been complaining about high gas fees. The EIP-1559 Additionally, the implementation of EIP-1559 is only a small part of the changes expected in the upcoming Ethereum 2.0 upgrade in early 2022.
Is EIP-1559 worth the hype?
One key deficiency in EIP-1559 is that fees are not expected to be any lower, just predictable. The London hard fork will likely allow users to have a fee in mind and overpay less often than the blind auction system. However, the base fee will still be set according to how busy the network is, meaning high fees will still be an issue.
Celer Network launched the cBridge solution, a multi-chain network that enables instant, low-cost, and ANY-to-ANY value transfers within and across Ethereum’s layer-2 chains, and the Ethereum main chain. In the future, Celer is planning to allow transfers across other Layer 1 chains and Layer 2 solutions for these chains.
👀Within the first week of launch, Celer’s cBridge helped 600+ users bridging 1000+ cross-chain assets transfer with a $2.5M in total volume, while saving users more than $90K in total gas costs.
— CelerNetwork (@CelerNetwork) August 2, 2021
Celer’s cBridge is building important scaling products to keep the decentralized finance (DeFi) ecosystem and DApps running efficiently while lowering the overall gas costs on Ethereum. With Celer’s advanced layer-2 roll-up technology, multiple users will be able to split the cost of the individual Layer 1 transactions in a trustless and non-custodial way enabling cheaper transactions.
Before digging any further into the deficiencies of EIP-1559, let’s understand exactly what changes will be brought about with its implementation.
The London hard fork implementation
The ‘London hard fork’, codenamed EIP 1559, is expected to go live this Thursday (August 5, 2021) with an aim to change Ethereum’s transaction fee model and start destroying (or burning) ETH coins. Originally planned for launch on August 4, the protocol upgrade was delayed slightly due to some development issues.
First, and most importantly, the change is all about making transaction fees more predictable in order to increase the usability and reliability of the blockchain. Ethereum gas fees are currently set using the ‘blind’ auction system which makes the system unpredictable as users bid to have their transactions processed and verified first. This causes the transaction fees to soar when the network is highly congested.
With the EIP-1559 implementation, users will pay a “base fee” which is algorithmically determined by the network depending on the congestion of the network. Additionally, users can also “tip” miners to have their transactions processed and verified faster. This “base fee” model will keep the network fees predictable, meaning fees will not be volatile as seen in the past.
What is keeping Ethereum holders and investors excited through the EIP-1559 implementation is not the gas fee model but rather the burning schedule proposed. Instead of paying the “base fee” to the miners, it will be destroyed, or burned, otherwise miners would just artificially congest the network to earn higher fees.
A layer 2 solution is needed
As alluded to, Layer 2 scalability solutions are still essential to Ethereum’s growth and the mass adoption of DeFi protocols. Celer Network is leading the charge in providing affix to the high transaction costs as the community awaits the switch to Ethereum 2.0 proof-of-stake (PoS) in 2022. The platform enables fast, easy, and secure off-chain transactions for not only payment transactions, but also generalized off-chain smart contracts
Last month, Celer announced its Layer2.finance, a layer-2 rollup-based DeFi aggregator. The aggregator allows users to interact with existing DeFi protocols with minimal costs. Layer2.finance provides scalability to DeFi apps without the need for chain migration hence increases efficiency, composability and reduces liquidity fragmentation across platforms.
“Layer2.Finance is a Celer Network product that aims to bring mass audiences to the existing DeFi ecosystem with layer-2 scaling technology,” a statement from the team reads.
It’s clear that the EIP-1559 upgrade will bring massive changes to Ethereum but without solving its scalability issues and high gas costs very few users will be able to be onboarded. With Ethereum 2.0 still months away from going live, solutions such as cBridge and Layer2.finance will enable DeFi users to conveniently use the products.
Notwithstanding, users will enjoy low-cost multi-hop value transfer between different layer-2 networks and have seamless connections between layer 1 chains.