The 2019 has started out promising for the crypto community at large and Ethereum advocates & holders in particular – as the highly anticipated Constantinople hardfork was scheduled to commence in the mid-January. However, just before the initial date came, the developers issued a statement that it’s cancelled for an indefinite period and didn’t even specify the possible date. We got a deep outlook on the situation and the reason why this hadfork can be very promising to the project and community, while having some adverse features at the same time.
What is Constantinople at large?
The widely announced Constantinople is supposed to become the next system-wide update for the Ethereum network. It is also called “Ethereum 2.0” or the “New Ethereum.”
Constantinople Ethereum is basically a part of a three-phase renovation, the second stage of the ambitious Metropolis project, and will be built particularly on block # 7080000, which can slightly increase the efficiency and performance of the whole network. It also brings together a total of five Ethereum improvement proposals (EIP).
Within the updates framework, the Casper Protocol is introduced, which is aimed to transfer Ethereum on another consensus algorithm, from PoW (Proof-of-Work) to PoS (Proof-of-Stake). In fact, that will not replace PoW immediately, but the hybrid system will likely be used, running these two technologies simultaneously.
Reasons behind another hardfork
Most of the crypto enthusiasts do know that hardfork is an update that eliminates backward compatibility. Sadly enough for the second-top cryptocurrency fans, the Ethereum rate had declined more than 10 times during its historical max back in 2018. In the aftermath, numerous platforms and companies initially launched on the Ethereum blockchain faced with pressure from the U.S. Securities and Exchange Commission (SEC) to trade securities and unregistered issues.
A lot of disappointment in 2018 crypto market performance lead to a loss of trust to ETH among users and investors of the crypto community. However, in early 2019, ETH experienced an unexpected rise as prices fell from a low of $ 83 to $ 123 (as of January 18, 2019). However, in the long term, most analysts view the upcoming changes as a bullish trend.
Besides, the developers realized that the complexity bomb initially programmed in Ethereum makes the blocks very slow after they are all solved. Developers have to run a hardforks from time to time just to fix bugs and to keep ETH up to date with the latest technology advancements. The difficulty bomb will make it impossible to extract ETH after a certain point and freeze the entire network, so it is also called the Ethereum ice age. Approximately 5,500 blocks will be created every day if a new block is generated every 15 seconds, which will definitely reduce the pressure on Ethereum cost and can prevent inflation.
Ethereum has already once experienced a split that led to the creation of ETC or Ethereum Classic. A fork called Constantinople will implement several significant changes related to improving the performance of the Ethereum blockchain and the mining rewards mentioned in these EIPs.
What particular issues solves the Constantinople?
As mentioned before, Ethereum 2.0 will feature 5 main EIPs. Let’s get a short overview of each of them:
EIP #145: solution for a more cost-effective and efficient approach to information processing, adding bitwise shift operators for EVM (Ethereum Virtual Machine). At the same time, this will consume 10 times less gas than before, which will ultimately lead to cheaper use of the smart-contracts.
EIP #1014: provides an improved approach to network scaling solutions – Vitalik Buterin has the one based on off-chain transactions and state channels, similar to the Bitcoin Lightning Network, which will automatically improve the network performance.
EIP #1052: a solution designed to improve the smart-contracts processing – adopting a unique hash would make checking another contract easier and more efficient.
EIP #1234: this solution makes the mining process more difficult, reduces the reward from 3 ETH to 2 ETH for a block. Lowering the block mining reward will also delay the difficulty bomb for 12 months.
EIP #1283: the last one will provide an improved way to monetize changes to stored data and better costs for smart-contracts. This will be achieved by breaking the contract changes that have been recorded in Ethereum memory. Since this does not affect any state changes in the blockchain, gas is not consumed, which reduces costs for developers.
As mentioned above, the block reward will be reduced to 2 ETH, and investors should be pleased with the lower inflation rate of Ether supply. However, on the other hand, the EIP 1234 changes will surely create discontent among miners as their block reward will decrease – just it was before during The Ethereum Classic hardfork.
Once the fork occurs, some short-term rate volatility is expected. The transition to PoS is a risk, but Vitalik Buterin does not mind such a risk, since he does not care about the short-term impact on the ETH rate at all. Meanwhile, as investors and crypto enthusiasts are already aware of the benefits of the transition, more of them are sure to come to the ETH camp.
In the case of Constantinople, the ETH holders will not receive new coins just because of hardfork. Users will receive new coins only if they have ETH in their personal wallet (Metamask, Ledger Nano S, Trezor) where they control private keys.
Mining will be affected
It is still unknown whether the Ethash will be replaced with new ProgPoW algorithm during the upcoming fork or not. The opinions of the developers of the Ether differ for this reason:
Principal developer Martin Canvas Swende believes that “trying to cram [ProgPoW] into Constantinople would be reckless.” Although it strongly supports the algorithm, it also acknowledges that there have been various specification changes and limited testing regarding ProgPoW so far. “I hope it will be adopted within a few months,” he added.
Hudson Jameson said the team is close to consensus on this issue:
“Most likely, we have reached a preliminary agreement on the implementation of the ProgPoW algorithm, but it will not be accepted until it is tested and will work without any errors.”
As for the miners, opinions had also splitted, and the disadvantages that will come along with the new algorithm: the ProgPoW power consumption of the graphics card will be slightly increased; AMDs will not be as beneficial as was with Ethash, and it is also worth noting the discontent of ACIS miners, as they will not be able to produce Ether anymore.
However, there are also some pros that will affect the mining community:
- ASIC units will be a relic of the past after Constantinople launch;
- Network complexity will be decreased;
- A ghostly chance of ETH rise in the future, as many rumors are out there about the involvement of Nvidia in the creation of the ProgPoW algorithm, which means the interest of the graphics card manufacturer to the pump of this cryptocurrency.
However, it is so far unlikely that ProgPow will be added to the upcoming fork, due to the fact that Ethereum has repeatedly postponed forks for more study and refinement, and the new algorithm is still insufficiently studied – some representatives of Ethereum claim – and there is no general agreement about the implementation of the algorithm in the network.
Therefore, most likely, the work on this algorithm will be continued, and on its basis, a decision will be made on the introduction of ProgPoW into the Ether network. One thing is for sure: most developers are in favor of implementing an algorithm that will save the network from ASICs.
The hardfork benefits for Ethereum & company perspectives in 2019
It is also expected that the block confirmation time will still be about 15 seconds. When Ethereum switches to PoS algorithm in the future as a result of another hardfork, the transaction processing time may increase.
It is also unclear whether the average cost of Ethereum transactions will change, but transaction fees associated with the issuance of smart-contracts may decrease, as some of these EIPs are aimed at optimizing such transactions.
The Constantinople is regarded as a major starting point of the Ethereum development roadmap for the current year.
At the moment, Ethereum developers are moving in the direction of the so-called “Beacon Chain” throughout their progress. The only thing for which the Beacon Chain is created is a new scaling function – “sharding,” which will divide the network into independent groups of nodes called shards. This will split the load on the network so that the underlying network will not carry the load of all transactions. Instead, the shards will redistribute the computational load of the Ethereum network to allow it to scale.
The known disadvantage of Beacon Chain is network security, as this can lead to separate attacks on each part of the upgraded network. That’s why fork implementation is essential to maintain this balance of security with decentralization and scalability.
The uncertain future
Long story short – the highly anticipated hard fork was delayed to the indefinite amount of time on Tuesday, January 15th.
The reason behind the Constantinople was postponed was the discovery of the critical vulnerability in one of the planned changes. The company ChainSecurity, which deals with the audit of smart contracts, said Tuesday that the proposal to improve EIP #1283, since it’s implementation realization could provide attackers with a loophole in the code to steal users ‘ funds.
Discussing vulnerability, developers of the project concluded that error correction would consume too much time and it cannot be carried out to a hardfork which was planned for 04:00 UTC on January 17. The vulnerability, called the re-entry attack, allows the attacker to re-apply to the same function multiple times, without notifying the user. As noted by Joanes Espanol, technical Director of the analytical blockchain company Amberdata, according to this scenario, the attacker, in fact, can “withdraw money forever.”
Summing up the facts
Although the delay in hardfork launch is undoubtedly explainable, it impacts on community and miners are ambiguous. Anyway, the company is distinctly working to develop and update technology to a top-notch level, as the incoming Constantinople will add such features as cheaper and better processing of smart-contracts, better network scaling options, difficulty bomb delay for another for 12 months and many other features. Shifting to PoS algorithm with Casper protocol, shards introduction, and rejection to support ASICs shows the progress vector chosen by the company, which sees the real goal in long-term project development rather than hype in short timeframe.
The next stage in the development of the cryptocurrency network — Serenity, should be held eight months after Constantinople is launched.
Author: Maria Lobanova, Head of PR cross-exchange arbitrage platform Arbidex