2021-08-06 09:04:41

Ethereum ‘London fork’ helps prices rally as bitcoin breaks $40K

Developers successfully completed a ‘hard fork’ of ethereum on Thursday, essentially changing the underlying code that the cryptocurrency relies on to run. Photo: Jakub Porzycki/NurPhoto via Getty

A successful change to the code underlying the world’s second biggest cryptocurrency ethereum (ETH-USD) has helped improve sentiment and drive crypto prices higher.

Developers successfully completed a “hard fork” of ethereum on Thursday, essentially changing the underlying code that the cryptocurrency relies on to run. The so-called “London hard fork” changes the way transaction fees are calculated on the network. 

“The fees will not necessarily be reduced, but they are likely to stabilize,” said Mati Greenspan, the founder of Quantum Economics. “What’s more interesting, however, is that a portion of the fees that used to go to miners will now be burned instead. It’s not great for miners, but it is really good for hodlers, as it reduces supply.”

Read more: Bitcoin, ethereum and the blockchain technology behind decentralised finance

“Miners” refers to the network of computers that validate transactions on the network to ensure they are not fraudulent. This work has traditionally been rewarded with newly minted crypto tokens.

“It doesn’t make ether a deflationary asset, since the issuance will still be higher than the amount burned,” Greenspan said. “However, it does make the digital currency more disinflationary than it was yesterday.”

Paolo Ardoino, chief technology officer at Bitfinex, said the changes would help attract more DeFi — decentralised finance — projects to operate on ethereum’s network.

“Scalability is moving to the next level, which is the most important thing,” said Naeem Aslam, chief market analyst at Avatrade.

Ethereum was up 3.2% to $2,772 (£1,991) by 8.40am in London.

Positive momentum for ethereum led to bullish sentiment across the cryptocurrency sector. The value of all tokens in circulation was up 3.8% over the last 24 hours, according to data provider CoinMarketCap.com.

Bitcoin (BTC-USD), the world’s biggest cryptocurrency, was up 5.2% to $40,916 on Friday morning. The token has been struggling to break much above the $40,000 mark for the last few weeks. Its price path today will be closely watched.

Watch: What are the risks of investing in cryptocurrency?

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