Ethereum co-founder Vitalik Buterin in an interview with The Star said “Scalability is a big bottleneck because the Ethereum blockchain is almost full. If you’re a bigger organization, the calculus is that if we join, it will not only be more full, but we will be competing with everyone for transaction space. It’s already expensive, and it will be even five times more expensive because of us. There is pressure keeping people from joining.”
The above statement highlights the fact that Ethereum is on the crossroad, the pressure to offer scalable solutions for enterprise customers, anxiety in developers community, and competition from other blockchain providers.
However, Ethereum, with its mission to enable real-world solutions and handle scalability issue, has come up with a plan — Istanbul Hard Fork in October 2019 followed by Serenity in 2020. Our post of today would talk in detail all about Istanbul Hard Fork, let’s get started –
What is Fork? | What is Istanbul Hard Fork?
So before we dive into Istanbul Hard fork specifically, let’s understand what Fork is? And why is it needed? What were the previous forks applied to Ethereum?
What is Fork?
A Fork as the word suggests is dividing a river/road into two parts. On similar lines when a blockchain that works with a set of protocols and consensus of participants, is divided get named as FORK. Now the division/splitting of the chain could be
· Planned Fork — It’s a planned upgrade/change to improve blockchain performance and usage. A planned fork upgrade example would be Ethereum’s Byzantium, the two-phase Ethereum upgrade plan that occurred in October 2017 for better scalability and the integration of private transactions.
· Contentious Fork — The contentious fork happen due to disagreements within the community, one of the Classic examples is Ethereum Classic a hard fork of Ethereum. The story goes like this — Earlier, Ethereum existed, but due to a significant bug that led to the hacking of fund DAO [decentralized autonomous organization], the team had two choices
a. Accept the hack
b. Implement a hard fork, wipe the transaction, and stop the hackers.
The community was divided, but Ethereum did commence the hard fork to a different network, and as their chain possessed less hash power, they had to go away with the name.
· Spin-Off Coins — These are changes to existing blockchain to produce new coins. Just, for example, Bitcoin protocol, that is an open-source subjected to code changes, and Litecoin was born. And others in the same category are Dogecoin, Namecoin, Peercoin, etc.
To conclude on Forks, essentially forks happen because the teams behind the blockchain want to make it a better, and faster.
What is Istanbul Hard Fork?
Istanbul Hard fork is a planned upgrade inspired by the historical name of Turkish biggest city — Istanbul.
The Ethereum founders in the last quarter of 2017, decided to include some of the significant features to the Ethereum blockchain. The upgrade was named as Metropolis, but the feature list was massive, and single-time implementation would be a difficult task. Hence they decided to split the upgrade into two — Istanbul Byzantium and Constantinople.
This Hard Fork is planned in two stages, the first stage is the integration of six EIP’s scheduled for October 2019, and the second phase in which activation of the main net planned for 2020. As Ethereum core developer Péter Szilágyi stated,
“We split Istanbul into two. One of them we can actually ship within weeks. [The other contains] two really big EIPs that would be nice to have but require some stuff that cannot be done within the two- or three-week timespan.”
What Features would Istanbul Hard Fork bring to Ethereum?
The Istanbul Hard fork is packed with 28 EIP’s or Ethereum Improvement Proposals. Some of the significant changes included in the upgrade are –
Change in Proof-of-work
Mining Algorithm, EIP 1057 that will change Ethereum’s proof-of-work mining algorithm with the newly created ProgPoW. Earlier in 2019, during security audits, ProgPoW was approved by 94% votes from coin holders and 100% from miners. The new ProgPoW is intended to allow for larger participation within Ethereum mining, thereby reducing the efficiency gap between GPU and ASIC miners.
Handling of Data Storage Process
To achieve smoother smart contract upgradability, EIP 1702 has been laid down.
At present, all the dapps [decentralized applications] that are running on Ethereum blockchain are called as smart contracts that are a self-executing line of code and virtually immutable.
The compilation and execution of these smart contracts are done via the Ethereum virtual machine, better known as the heart of the blockchain network. It assists as the driving engine for numerous dapps created and deployed by developers.
With EIP-1072, the Ethereum virtual machine would be upgraded to Web Assembly Code that would offer developers in flexibility to programming language and performance. A new methodology called “account versioning” would be introduced in hard forks so that upgrading a virtual machine is easier.
As Parity Technologies developer Wei Tang explains in his proposal –
“By allowing account versioning, we can execute different virtual machine for contracts created at different times. This allows breaking features to be implemented while making sure existing contracts work as expected.”
Code Execution and scaling issues
The elliptic curve arithmetic precompiles currently overpriced. Repricing the precompiles will assist privacy and scaling solutions on Ethereum.
As Ethereum’s Vitalik Buterin tweeted
These changes would help in
· Increasing the capacity of Ethereum Blockchain
· Ensuring a high level of network decentralization
· Assisting with several scaling and privacy solutions building on the platform by making small adjustments to network gas fees.·
Concerns about Istanbul and Serenity Hard Fork
Two Ethereum blockchain
Ethereum Serenity or Ethereum 2.0 that is scheduled for January 2020 would roll-out a new blockchain with features like proof-of0stake consensus and database sharding.
This creates a bit of anxiety as well as optimism as then two Ethereum blockchain would be in operation — Ethereum 2.0 and Ethereum 1.0 [at least for 5–10 years]
Repetitively we have seen Ethereum pushing dates on project deadlines, making it hard for stakeholders and community to understand how the ecosystem would be in the near future.
Ethereum uses Ethash hashing algorithm to secure transaction and encrypt data on the blockchain network. However, Ethash is incompatible with the ASIC chip [ bespoke chip designed to mine a particular cryptocurrency], it is memory intensive and designed for GPU miners [who uses the general-purpose chip for mining].
However, with hardware evolving, developers were incentivized to develop ASIC miners capable of mining Ethash.
If ProgPoW is implemented, it will make any current Ethash ASICs unable to mine the Ethereum chain. Prospective Ethash ASICs miners may choose to mine the Ethereum Classic (ETC) chain, which also uses the Ethash algorithm.
Revenue hit for Stakeholders
If Ethereum shifts to a less power-intensive proof-of-stake model or starts implementing off-chain scaling, Nvidia may suffer a revenue hit as they are the supplier of GPU’s for mining purposes.
The divided Industry
ProgPoW is not taken up positively by some of the experts in the industry
Effects of Istanbul on ETH pricing?
History suggests Hard forks have a profound impact on the pricing of the cryptocurrency due to uncertainty.
A quick example is Bitcoin Cash hard fork. Post a contentious hard fork implementation, an interesting permutation was witnessed, holders of the “parent” cryptocurrency would have an equal number of forked off coins. For example, if you had held 10 Bitcoin at the time of the Bitcoin Cash fork, you would end up with 10 Bitcoin Cash. Seems a compelling case to create ripples in the market.
Now let’s explore how Ethereum Hard Fork had impacted the ETH pricing –
Source — coingecko
As we see, the majority of the Hard Fork has given a boost to ETH. For Ether Gold hard fork, although ETH prices were dipped, within two days prices started following an upward movement and within a month of Ether Gold Hard fork on 11-Jan-2018, the price was $1315.62. But a different scenario is witnessed during Ether Inc hard fork, when the prices kept going down and bounce happened on May 2018.
With a current market capitalization of $19.05B and supply of 107.01M Istanbul fork is targeting to solve some significant concerns, that could boost ETH price as well.
What are your thoughts?