Ethereum 'hard fork' helps cryptocurrencies rally as bitcoin rises above $40,000

An effective change to the code underlying the world's second biggest cryptocurrency ethereum (ethereum to 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 just how transaction fees are calculated on the network. 

"The fees won't necessarily be reduced, nevertheless they will likely stabilize," said Mati Greenspan, the founder of Quantum Economics. "What's more interesting, however, is a portion of the fees that used to go to miners will now be burned instead. It's not ideal for miners, but it is really beneficial to hodlers, since it reduces supply."

"Miners" identifies the network of computers that validate transactions on the network to make sure 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 quantity burned," Greenspan said. "However, it will make the digital currency more disinflationary than it had been yesterday."

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

"Scalability is moving to another level, that will be the most crucial 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 generated bullish sentiment throughout the cryptocurrency sector. The worthiness of tokens in circulation was up 3.8% throughout the last 24 hours, based on 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 going back few weeks. Its price path today is likely to be closely watched.