Last week, Ethereum activated a major change that has been called “the London hard fork”. It made some major changes to the code that underpins Ethereum.
The Ethereum community has been waiting a long time for this change, and it has taken much longer than expected as a result of internal struggles over which direction the upgrade should take.
Despite the name of the upgrade, the changes have little to do with the city of London. One major change has altered the way that transaction fees are calculated to make them less volatile. Another change makes it more difficult for miners to make money. Eventually, Ethereum mining could become completely irrelevant.
Ethereum isn’t the only major cryptocurrency being upgraded
In June, Bitcoin miners around the world gave the green light to upgrade Bitcoin. This will be the first Bitcoin upgrade in four years. It will provide greater privacy and efficiency when it comes to transactions, and it will also unlock the potential for smart contracts.
The upgrade is set to go live in November. But, like with Ethereum, internal struggles have meant that things are taking far longer to progress than expected.
While major cryptocurrencies waste time, smaller cryptocurrencies are iterating quickly
It’s common knowledge within any tech community that rapid innovation is required to stay ahead of the curve. But while Ethereum and Bitcoin slog through the red tape, and their communities bicker between one another, smaller, lesser-known cryptocurrencies are moving towards their goals much faster.
Tezos, for instance, has just completed its seventh upgrade, ‘Granada’, this week. There’s a reason why the Tezos community describes it as ‘a blockchain designed to evolve’.
The platform uses a proven form of on-chain governance that guides the discussion of proposals and enables public discourse before a vote is taken by validators. And unlike Bitcoin and Ethereum, Tezos’s on-chain governance means that it will complete its upgrade without even having to do a hard fork.
This most recent upgrade makes Tezos one of the only blockchain networks that works on the principle of a robust, solid governance system.
Last week, a Tezos community member released a decentralized road map. In it, they compared Tezos’s on-chain governance to Bitcoin and Ethereum’s off-chain governance, by comparing the most contentious suggested upgrade on each chain.
The key differences between Ethereum’s EIP 1559 and Tezos’s liquidity baking upgrades
For Ethereum, this upgrade is known as EIP 1559. It was first introduced by one of Ethereum’s key co-founders, Vitalik Buterin, in 2018. For Tezos, the upgrade is referred to as ‘liquidity banking’, and was introduced by Tezos co-founder, Arthur Breitman.
The EIP 1559 upgrade will burn some of each transaction fee (TX fee), which is the amount charged by miners for processing your crypto transactions. Ultimately, it will make fees more predictable. Given that at times it will make ether deflationary, this upgrade provides great narrative appeal for the moneyness of ETH.
On the other hand, “Tezos’s liquidity baking will take a small amount of each block reward to use for a protocol level constant product market maker,” the post’s author, known as textrapper, states. “Liquidity Baking will bring more liquidity to the baselayer currency of Tezos and it has great narrative appeal as it continues to highlight the ability of Tezos to innovate.”
Coincidentally, these upgrades went live around the same time. Ethereum’s upgrade went live on August 5. After initially trading lower going into the upgrade, the price of ether has increased significantly since. Tezos’s liquidity baking upgrade, on the other hand, went live the day after, on August 6.
While both of these upgrades have been extremely popular with their respective communities, one key difference remains: while 1559 took almost 3 years from conception to release, liquidity baking took less than one year.
If Ethereum aims to keep its position and fend off smaller cryptocurrencies like Tezos, it will have to iterate much more quickly, but the question remains if that is even possible considering the limitations of off-chain governance.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.