After several months of testing and delay, Ethereum Constantinople hard fork is finally on its way. Expected to be executed by end of February, the long time awaited Ethereum Constantinople Hard Fork is bringing a lot of changes.
Constantinople is second part of the Metropolis update. So, in this post we will explain Constantinople in no to much technical details but enough that you can see what changes it is bringing into the ecosystem.
Ethereum Constantinople Hard Fork
Before we begin with details about Constantinople, let’s educate you about forking and why they are essential.
What is a fork?
Forking implies any divergence in Blockchain — temporary or permanent. Very simply, forking is said to happen when a Blockchain splits into two branches. It can happen as a result of a change in algorithm or other software changes. Depending on the nature of change, the fork can be categorised into Hard Fork and Soft Fork.
A hard fork is a permanent separation from the previous version of the Blockchain, and nodes running previous versions will no longer be accepted by the newest version. A hard fork is a essential change to the protocol that makes previously valid blocks or transactions invalid. Any transaction on the forked (newer) chain will not be valid on the older chain. All nodes and miners will have to upgrade to the latest version of the protocol software if they wish to be on the new forked chain. This essentially creates a fork in the Blockchain, one chain which follows the new, upgraded Blockchain, and one chain which continues along the old path.
A soft fork is said to happen when a change to the software protocol keeps it backward compatible. What this means is that the new forked chain will follow the new rules and will also honor the old rules. The original chain will continue to follow the old rules. This kind of fork requires only a majority of the miners upgrading to enforce the new rules, as opposed to a hard fork which requires (almost) all nodes to upgrade and agree on the new version.
The primary difference between a soft fork and hard fork is that hard fork it is not backward compatible. Once it is utilized there is absolutely no going back whatsoever. If you do not join the upgraded version of the blockchain then you do not get access to any of the new updates or interact with users of the new system
So, that is what a fork and a hard fork is.
Forks happen all the time. And they will happen in the future, crypto is young technology and forks (upgrades) are essential for technology to develop. All systems need to update. It is only when the community is divided about a fork when the issues happen. Thankfully, the Ethereum community is not divided about the Constantinople hard-fork. There are still some minor issues of course, which we are going to talk about later.
The 4 Stages of Ethereum
This, not the first time Ethereum has foked(upgraded) of course and it won’t be the last time.
Ethereum was not designed to be just a mode of currency. It was designed to be a platform for decentralized applications. However, before it can do so, it needs to go through various stages of growth. With each stage, Ethereum “levels up” by incorporating more and more properties making its system more robust and seamless.
The complete launch process of Ethereum was divided into 4 stages. This was done to make sure that various phases got their own developmental time and that every stage was developed as efficiently and optimally as possible.
The 4 stages are as follows:
- Frontier: This was what everyone got when Ethereum was first launched.
- Metropolis: The current phase. Since there are so many updates in Metropolis, it was subdivided into Byzantium and Constantinople
- Serenity: The final stage.
Introducing Ethereum Constantinople
The Constantinople hard fork is now expected to happen around block height 7,280,000 which is expected to occur sometime around end of February. This update is going to introduce five Ethereum Improvement Proposals or EIPs to the ecosystem:
- EIP 145: Bitwise Shifting
Developed by two ethereum developers, Alex Beregszaszi and Pawel Bylica which introduces a native ‘bitwise shifting’ that can run through bytecode at a cost which is similar to other arithmetic operations.
- EIP 1052: Optimizing Large-Scale Code
Offers a means of optimized large-scale code execution on ethereum. This will allow only the compressed code containing essential contract data is checked, as opposed to the whole code. This was authored by Nick Johnson and Bylica.
- EIP 1283: Net Gas Metering
This EIP is based on EIP 1087 which was again written by Nick Johnson. This EIP helps in reducing the amount of gas developers need to pay to run and execute their smart contracts by cutting off excessive and unnecessary gas usage.
- EIP 1014: State Channels
This EIP was created by Vitalik Buterin himself. This will basically help Ethereum to leverage state channels to enable them to communicate with off-chain addresses. This will help in the scalability of the entire system.
- EIP 1234: Slowly transitioning from POW to POS
Easily the most controversial update which has been championed by the release manager of Parity, Afri Schoedon. This will gradually remove the difficulty bomb from Ethereum’s system and reduce block reward from 3 ETH to 2 ETH for a 12-month period.
Ok, so before we understand the significance of last most important EIP1234, let’s understand certain things, mainly:
- Proof of Work
- Proof of Stake
What is Proof of Work?
Most cryptocurrencies including Bitcoin run on “proof-of-work.” Proof-of-work as a process has the following steps to it:
- The miners solve cryptographic puzzles to “mine” a block to add to the blockchain.
- This process requires an immense amount of energy and computational usage. The puzzles have been designed in a way which makes it hard and taxing on the system.
- When a miner solves the puzzle, they present their block to the network for verification.
- Verifying whether the block belongs to the chain or not is an extremely simple process.
Ethereum, as of right now, is using the Proof of Work (POW) consensus mechanism. Now, that you know what POW is and the role that the miners play, it is time to understand what “difficulty” means.
What is difficulty?
Ok, so before we understand the term, let’s do a thought experiment.
The idea behind mining is for miners to use their mining power to solve these cryptographically hard puzzles and get Ethereum in return as a reward. Unlike Bitcoin, Ethereum doesn’t have a hard cap on its total supply. But, you still need to regulate the amount of Ether that is floating around in the system to make sure that the supply-demand equation doesn’t go out of balance.
This is why, both Bitcoin and Ethereum have a “difficulty” parameter hard-coded into their system. The difficulty makes sure that the time taken between the creation of the blocks remains the same. So, if the block creation time is too low, then the difficulty goes up and if it is too high, then it will go down.
The following chart shows the difficulty in Ethereum’s network from November 19, 2018, to February 15, 2019.
Current Ethereum Difficulty stands at 2,733,391,547,988,540.00000000
Alright, so now onto Proof of Stake (PoS).
What is Proof of Stake?
Proof of stake will make the entire mining process virtual and replace miners with validators. This is how the process will work:
- The validators will have to lock up some of their coins as stake.
- After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
- If the block gets appended, then the validators will get a reward proportionate to their bets.
Ok, so now you know the bare details. You know the basics of PoW, PoS and difficulty, now let’s get into the bare details of EIP 1234.
Ethereum’s method of PoS implementation is called the Casper Protocol. Obviously making a sudden shift from PoW to PoS will be extremely inadvisable. In order to smooth over the transition, Ethereum is going to first introduce a hybrid PoW-PoS consensus mechanism called “Casper FFG”.
As a part of this transition, they have decided to also introduce a “difficulty bomb” which will make mining so hard on the Ethereum blockchain, that the miners will have no incentive to do so and everyone will eventually move on to PoS. The point where mining becomes so difficult that it is almost impractical is called the “ice age”. The difficulty bomb was introduced on 7th September 2015 and has been programmed to raise difficulty exponentially.
Now, this is all well and good, however, the Casper Protocol is not ready yet for full implementation and there is still some work left to be done. This is why, instead of just delaying Constantinople as a whole, they have delayed the difficulty bomb by 29 million seconds or approx 12 months.
This brings us to the next problem.
Because the difficulty has been delayed it will become much simpler for miners to mine blocks and they will be able to do so with much more regularity. So, to counterbalance this, the block reward will go down from 3 ETH to 2 ETH. This reduction can be thought of as a “stop-gap” to the “supply bleed”.
This EIP has caused a huge controversy in the community. The author of the EIP. Afri Schoeden has called it the “the best proposal to stabilize issuance while simultaneously delaying the bomb.”
However, there are other members in the Ethereum community how have opposed this EIP arguing that the reduction of the difficulty will lead to more centralization.
Conclusion about Constantinople hard fork
The entire crypto community is looking forward to the Constantinople hard fork. By doing that, Ethereum will take another major step toward serenity and full implementation. As you can imagine, there are some truly radical changes coming in which will not only greatly benefit developers, but it will help them gain momentum towards full PoS implementation as well. We just have to wait and watch to see how it all works out.
Is this going to spark upward momentum in terms of Ethereum price?
There is a lot of buzz going on right now and for good reason. Last time Ethereum did something so significant, the price went from $12 up to $30 making almost 150%.
After dropping from its all time high more than 90%, Ethereum found its support at an important weekly level. After that, it went up outperforming Bitcoin in that move up. At the moment of writing, by making higher low confirmed by bullish engulfing candlestick pattern, it is showing strength in the market.
Back to the general trend, even if it is showing potential reversal signs, it is still too far from turning bullish. Considering the whole move down, it is still pretty low. First resistance is at 200, while first resistance based on Fibonacci retracement is all the way up at $400. Our conclusion is that ETH chart is looking good and we expect some upward movement in near future.
This is our opinion only do not take this as financial advice, always do your own research before investing or trading financial markets.
- Hard Fork — Investopediahttps://www.investopedia.com › Tech › Cybersecurity
- What is Hard Fork? — Cointelegraphhttps://cointelegraph.com/bitcoin-cash-for-beginners/what-is-hard-fork
- Fork (blockchain) — Wikipediahttps://en.wikipedia.org/wiki/Fork_(blockchain)
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