Ethereum decrypted: What is the Istanbul upgrade?

On December 7th, 2019, the Ethereum blockchain underwent the Istanbul upgrade. It contains six distinct upgrades that work to improve performance, adjust costs, improve interoperability, and enable more creative functions around smart contracts.

Let’s break it down to understand better what the Istanbul upgrade means both at a technical level and with respect to the industry.

What is a fork in blockchain?

Simply put, a fork is synonymous to a software upgrade. It can be compared to a snake shedding its skin, except that the concept of a fork better captures the political and technical elements involved in this type of upgrade.

As you know, a blockchain is a succession of blocks of data that each refer to a former block, thereby imbuing historical data with legitimacy. When a fork occurs, quite literally, the ‘chain’ splits, with one part (the upgraded part) ideally continuing onwards as if unbroken. The other part is either abandoned altogether or continues as a competitor to its ‘other half’.

We have seen such a situation happen when the old Ethereum split into Ethereum and Ethereum Classic. Both now exist as separate protocols and currencies (ETH and ETC).

Other examples include Bitcoin’s splitting between Bitcoin and Bitcoin Cash, but also less contentious forks where big changes are made to the source code, basically amounting to the creation of an entirely new currency — e.g. Zcash.

What’s important to bear in mind is that upgrades to a blockchain — which is usually open-source — take a lot of time to take shape, because consensus needs to be reached in the community. This is different from, say, a centralised Windows or Apple update, which is pretty much imposed top-down upon the entire community of users.

Generally, we can distinguish between soft forks and hard forks. Soft forks are less invasive. They are ‘backwards-compatible’ with previous versions of the software, but not the other way around. In other words, there is no risk of the network splitting into multiple chains and currencies.

Hard forks constitute big changes to the protocol, requiring miners and other node operators to support the upgrade, or else risk splitting the network into multiple chains that cannot be reconciled with one another.

The brilliance of Ethereum

Ethereum is the second biggest cryptocurrency in terms of market capitalisation. When an upgrade happens, it’s a big thing, and potentially risky. A hard fork gone wrong could split a community, impact the original currency’s value greatly, or could introduce loopholes for hackers to take advantage of.

Apart from the dramatic hard fork which created Ethereum and Ethereum Classic as two separate communities, most of Ethereum’s hard forks are not the result of contention, but planned years ahead of time.

The development of the Ethereum blockchain is divided into four stages:

• Frontier
• Homestead
• Metropolis: Byzantium, Constantinople, Istanbul, Muir Glacier, Berlin
• ETH 2.0 — Beacon Chain

The final stage is when Ethereum, in addition to introducing sophisticated functions, transitions from Proof-of-Work to Proof-of-Stake consensus. It is generally seen as the most radical phase of Ethereum’s development.

The above also shows that the recent Istanbul upgrade forms part of the Metropolis phase, which is all about enhancing security, scalability, privacy, flexibility, and efficiency.

What is the Istanbul upgrade?

The Istanbul upgrade, which is not yet complete, brings the final network upgrades to the Ethereum blockchain before the transition to ETH 2.0.

This particular upgrade brings interoperability with Zcash, facilitates cheaper and strong privacy functions, and helps make the network more resilient against denial-of-service attacks (this is when a network is flooded with requests and overloads). The upgrade also introduces more creative functions around smart contracts.

As these upgrades are generally geared towards improving user experience, there was little fear for the community dividing over this.

In terms of Ethereum price, we did see the value of Ethereum drop from $150 to $130 over the course of December 2019, with a more pronounced retreat from $140 to $120 on December 17. However, there is no indication of this being a direct result of the Istanbul upgrade.

If anything, as Ethereum continues to unfold its grand plan, showcasing a healthy balance between planned development and dialogue, investors in Ethereum must be in good spirits. If investor confidence remains strong and Ethereum continues to find utility, we should see Ethereum’s price recover soon.

Originally published at https://www.bitspark.io.