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Ethereum's Next Upgrade Could Be the $29 Billion Blockchain's Biggest Test Yet

Hard forks are never easy.

By definition, such system-wide upgrades require every software user to upgrade to new rules near-simultaneously, meaning there’s coordination difficulties that need to be overcome to ensure the code continues to operate as designed. Still, in a upcoming October upgrade named Constantinople, ethereum is faced with a unique challenge — how to find a balance between a web of diverse stakeholders, each battling for different outcomes.

Making matters more complex, there’s a hard deadline for the upgrade, currently set for October. Predicted sometime in early 2019, a piece of code known as the difficulty bomb is scheduled enact, thereby making ethereum’s blocks steadily less time efficient to mine.

If no action is taken, the difficulty bomb will push ethereum into what is known as the “ice age,” a period wherein the difficulty is so high that transactions can no longer be processed, making the blockchain unusable.

Because delaying the difficulty bomb also impacts ether inflation (the time it takes to mine blocks is directly correlated to the quantity of ether distributed on the platform), ethereum is under pressure to upgrade its code before the bomb hits.

But, at present, a path forward remains unclear.

With a total of four ethereum improvement proposals (EIPs) currently under discussion, many are arguing that in delaying the difficulty bomb, Constantinope should also reduce the amount of ether that is currently paid out to miners, the entities that run specialty computing hardware to secure transactions.

However, miners are warning that too great a decrease in profits will reduce the security of the network, effectively forcing miners to secure other cryptocurrencies. (Concerns are especially great for GPU miners, which are now currently competing with ASICs, machines specialized for cryptocurrency mining and little else).

While an exact timeline for Constantinople has yet to be finalized, developers are pointing to late October or November as the likely timeline for the upgrade (any later could risk intersecting with the difficulty bomb). As such, in an upcoming meeting on Friday, developers are likely to finalize the EIPs to be included in the upcoming hard fork.

Communications officer for Parity Technologies, Afri Schoedon, told CoinDesk:

“We are moving toward a decision with fast steps now.”

Balancing act

At the time of writing, there are three EIPs to be included in the upcoming hard fork that aren’t controversial at all, and have already been implemented in code and are currently undergoing testing.

These include EIP 145, EIP 1014, and EIP 1052, which respectively, seek to add new flexibility to ethereum’s operations, facilitating scaling measures such as state channels and increasing the speed at which contracts can be verified.

Aside from these however, other proposals require careful coordination.

As reported by CoinDesk, much of the current division was aired last Friday, when developers initiated a public discussion with several representatives of the platform’s key stakeholders.

While no consensus was reached, several stakeholders have since taken to social media to layout their concerns.

In a blog post published Monday, CTO of a mining startup named Atlantic Crypto, Brian Venturo, warned that “the security of the ethereum network is NOT something to compromise over.” He championed EIP 1295 as the only proposal that doesn’t potentially lower security.

EIP 1295 does not reduce issuance, but rather reduces the amount of ether that is rewarded to uncles, a kind of block that speeds transactions but isn’t included in the blockchain itself.

“If you reduce the block reward you’re going to price out a large proportion of hardware,” Venturo told CoinDesk, stating that such hardware might instead become available for attacks if the reward for malicious services is higher.

While miners are pushing back against the issuance reduction, at the same time, ETH traders are pointing to the dropping market valuation of ether, stating that steps must be taken to preserve the value of the currency by limiting issuance.

In a Twitter thread that compared current bitcoin’s current issuance rate to ethereum, a trader named Eric Conner remarked that if the reduction is pushed down to 2 ETH, it doesn’t slip lower than bitcoin’s current rate.

According to Conner, such a reduction is necessary to preserve the value of the network.

“Fun fact! In the past 365 days, the ethereum network has paid $6.6 [billion] to miners,” Conner tweeted.

The compromise

Adding to the criticism is that founder of ethereum Vitalik Buterin has pushed back against EIP 1295, writing on Github that it could result in the further centralization of mining pools.

“I’m scared of this,” Buterin wrote.

An investor and fund manager named Spencer Noon also pushed back against the proposal.

“I’m completely unsupportive of EIP 1295 and I question the motive of its author (Atlantic Crypto Corp),” Noon tweeted, “ACC is a mining company run by former hedge funders. This has nothing to do with ‘network security’ — a block reward reduction would hurt their bottom line.”

Several Reddit posts have followed a similar tone, and in response, the mining company has retracted its current proposal in favor of arguing that the issuance reduction should remain at 3 ETH.

“We agree that the ETH denominated issuance may be too high, but we also believe that adjusting it under the current market conditions will put undue risk on the security scale of the network,” Venturo wrote on Github.

Speaking in a developer meeting Friday, Casper developer Danny Ryan said that a reduction to 2 ETH seems like a “reasonable compromise” that could balance the interests of both traders and miners. Similarly, because GPU miners are struggling to compete with ASICs, a removal of the hardware from the platform through a proof-of-work change would be another “reasonable compromise.”

Toward this, a GPU miner and enthusiast named Kristy-Leigh Minehan is championing an code fix to be implemented in Constantinople.

Still, some feel it’s unlikely it will make the cut.

“This would be a lot more work to implement than the other EIPs,” Michael Hahn, of ethereum wallet MyCrypto, told CoinDesk.

High stakes

All this means, there could be difficulty ahead of October. If a certain proportion of ethereum nodes chose to run different software, it could lead to a split in the network (not unlike what occurred when ethereum classic emerged following a disagreement on technical direction in 2016).

Still, there’s way in which existing ethereum code could actually help protect the network when it comes to splits.

For example, due to the presence of the difficulty bomb, an ethereum researcher named Andrew Bradley said opportunistic fork attempts without developer support are unlikely to win out.

“It reduces the likelihood of stale chains being picked up with little effort and sustained by exchanges or precarious parties without real development support,” Bradley told CoinDesk.

Still, the complexity Constantinope has unearthed between competing miner and trader interest have sparked a wave of community engagement in the discussion.

“We’ve had a lot of community enthusiasm for the forks,” Hudson Jameson, a communications officer for the Ethereum Foundation, told CoinDesk, “It’s weird hearing about people watching and participating in discussion around the bi-weekly core developer calls.”

Speaking to CoinDesk, Schoedon from Parity echoed this point, stating that Constantinope is unique in that it has widened the doors of involvement when it comes to tough decisions.

“In the past, contentious proposals were either accepted straight away or stalled forever,” Schoedon said.

However, in this case, decisions had a wider set of stakeholder engagement, which while makes it makes the coordination process more complicated, it takes the pressure away from the core developer team.

“Off-chain governance is difficult, and that’s probably a good thing,” Schoedon added.

And while the developers still have the last call – expected to be finalized on Friday – many stakeholders expect them to uphold the technical stability of the network above all else.

Brian Venturo told CoinDesk:

“They understand this stuff better than everyone else and I think they’re going to make the right decisions.”

Science experiment via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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A Phone Call Could Impact Ethereum's Future – And It's Happening Today

Miners, investors, developers and more.

That’s a summary of the diverse set of ethereum stakeholders that will be in attendance at an upcoming developer call, according to Ethereum Foundation communication officer Hudson Jameson. Set to take place at 14:00 UTC Friday, the live-streamed meeting aims to address some of the platform’s most challenging questions ahead of its system-wide upgrade planned for October.

As part of that upgrade, there are several non-contentious ethereum improvement proposals (EIPs) already ready for testing, but also included are others that have stirred up controversy.

In particular, three concepts – the difficulty bomb, ether issuance and ASIC resistance – are at the heart of the debate, since each could have a lasting impact on how the blockchain operates. For instance, these code proposals could alter the regularity of ethereum upgrades, change the network’s economic policy and prevent specialized hardware from mining on the blockchain.

As such, core developers that usually attend the meetings have called for a larger set of voices, namely ether miners and investors, to be present to discuss a way forward.

“There is a strong community sentiment toward delaying the bomb, to reduce the block reward and to introduce changes to the hashing algorithm, however, it’s unclear how we proceed from here,” communications officer for ethereum software provider Parity Technologies, Afri Schoedon, told CoinDesk.

In the run up to the meeting, debate has been building on social media, with many of the platform’s stakeholders holding incompatible view points. And because the outcome will impact stakeholders in conflicting ways, Jameson has invited a number of people to the call to give their positions on the proposals.

“We have multiple miners, including nearly 50 percent of the ethereum hashing power (46 percent) either attending the call or making statements that will be read during the call,” Jameson said.

He told CoinDesk:

“Our aim was to have a variety of voices collaborate on this issue.”

Investors

Adding urgency to the current discussion is the so-called “difficulty bomb” – a piece of code locked into the platform that makes its blocks steadily less efficient to mine over time.

Because delaying the bomb also impacts issuance, there are a total of six conflicting proposals, each offering slightly varying methods for moving forward.  

Two proposals on the agenda for Friday’s meeting seek to reduce issuance — something some ether holders believe is too high. (Currently, the inflation rate is fixed at 3 ETH per block — down from 5 ETH since last October.)

While there’s a host of ethereum investors who have yet to publicly comment on the matter, several investors have taken to social media to call for a reduction in ethereum issuance, contending that the current inflation rate is an unnecessarily high tax on the holders of the cryptocurrency.

For example, some are pointing to a quote attributed to the creator of ethereum Vitalik Buterin in 2017 that states: “In the foreseeable future, the supply will not go far above 100 million,” a figure which as now been surpassed.

Others are going so far as to blame the inflation rate as the reason for ether’s market value decline, which hit a 2018 low of less than $300 earlier this month.

“Ether issuance is wildly over where it should be,” one user wrote.

Still, because it decreases the quantity of ether that miners are awarded to mine blocks, there’s a risk that too high an issuance reduction with be harmful to miners, forcing them to move their equipment onto another network.

Miners

That said, some are arguing that despite high issuance, miners that rely on general purpose hardware are already suffering.

“There is basically zero profit right now for normal GPU miners,” one user claimed on Github.

As detailed by CoinDesk, while ethereum was previously thought to be a GPU-friendly, ASIC-resistant cryptocurrency, the specialized mining chips have been available for use on the network since March. Leading advocates of GPU mining argue that efforts should be made immediately to remove the hardware from the platform.

In the past few months, the questions of ASIC resistance largely fell quiet, but questions around tweaking the difficulty bomb and underlying issuance model have caused the arguments to reactivate. And that’s because proponents argue that a reduction in issuance could push the last remaining GPU miners off the network, that are already competing against a rising hashrate.

Several stakeholders are pointing to a proposal named EIP 1057 as a method for ASIC resistance, that uses a randomizing, ASIC-resistant proof-of-work algorithm originally designed for monero to remain resilient against ASIC hardware manufacturers.

Speaking to CoinDesk, Peter Pratscher, the founder and CEO of Ethermine, an ether mining pool, said that among the company’s miners, the question of ASIC resistant eclipses all other concerns.

“We have reached out to our miners and from their response, it is clear that the most important point for them is to include a [proof-of-work] change to obsolescence ASICs,” Pratscher said, adding that the attitude around issuance was “somewhat ambivalent.”

Still, it’s a question that has proven to be divisive, with some users taking to Reddit to warn it is “not the answer,” and could impinge on valuable developer time in the run up to proof-of-stake.

Developers

Of all the platforms stakeholders, developers are perhaps the most difficult to pin down – especially as many avoid taking a position in polarized debates, preferring instead to focus on delivering code.

Still, among this group, there’s a general tendency to be less interested in the question of issuance — in part because there’s an attitude that the high valuation of ether reduces its usefulness within the platform.

For many ethereum developers for example, the question of ASIC resistance is also of important ideological importance, because it relates to the underlying decentralization of the network — and therefore its resilience to attack.

Others hold the inverse position, believing that by raising the cost of attacking the network — ASICs are comparatively much more expensive than GPUs — the hardware is good for security.

That said, there is a topic that remains of particular interest to the developers – the difficulty bomb.

“Delaying the bomb is the easiest part, everyone pretty much agrees we should do that,” Schoedon told CoinDesk.

And while it’s true the consensus roughly is that the bomb should be delayed, there’s some disagreement about whether to remove its code entirely or to keep it embedded in the software. Because it was installed to prepare the network for the change to proof-of-stake, some argue that it is now irrelevant given the delay in that change’s timeline for execution.

Still, others believe that it has developed an entirely new function — forcing ethereum to come together and find consensus on complicated problems, just like these.

Speaking to this, because of the difficulty bomb, core developer Nick Johnson told CoinDesk:

“People are welcome to stick with the status quo, but they have to make an affirmative decision to do so, rather than letting inertia do the work for them.”

Phone via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Ethereum Classic Claims Successful Blockchain Fork

Ethereum classic has removed its so-called “difficulty bomb.”

Designed to increase the difficulty of mining its blockchain over time, the code was a feature of the original ethereum codebase (which later split into ethereum classic and ethereum) in 2016. The successful network upgrade took place at block 5,900,000, according to available network data and statements from developers involved in the project.

While it is difficult to account for exact percentages in terms of how many nodes updated their software (owing to a lack of available tools), developers involved with the project told CoinDesk that most exchange nodes and mining pools reported updating their software well before the fork.

There was no indication of any ill effects or bugs in the hours immediately after the fork. The upgrade is expected to reduce the amount of time it takes to create a block.

As such, the upgrade puts both technical and ideological distance between the ethereum classic and ethereum blockchains.

While the ethereum community remains committed to transitioning to a proof-of-stake consensus system, the ethereum classic community has elected to continue using proof-of-work, as its members contend that, of the various ways to achieve consensus over block validation, it resists centralization best.

More specifically, advocates argue that proof-of-work systems require their validators (miners) to continuously invest in hardware and therefore in the blockchain.

Deliberation on the fork started as early as 2016, and due to the extensive discussions, the upgrade was not expected to be controversial or complicated.

Smoking match image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.