What You Need To Know About The Ethereum Hard Fork
The much speculated hard fork in the ethereum ecosystem, that was expected to roll out on 16th January, has been delayed. The core developers decided to delay the fork after ChainSecurity, a Switzerland based blockchain audit firm, found potential vulnerabilities in the code. They cited a ‘re-entrance attack’ as a potential threat, whereby a pair of hackers can use the code to simulate a secure treasury sharing service.
Second Upgrade in the Metropolis Live Release
The Constantinople hard fork is set to be the second upgrade, after the Byzantine update, on the Metropolis live release. With this fork, the developers and community are trying to transition the network from proof-of-work to proof-of-stake.
This fork is basically a maintenance and optimization fork. There are two kinds of forks that take place when developers want to enact a mutually agreed upon software update.
Soft Forks and Hard Forks
Soft Fork — A soft fork is backward compatible. This means that members don’t have to switch over to a new chain. The creation of a new chain does not affect any variables, even in the old chain.
Hard Fork — In the case of a hard fork, the developers of the community don’t agree on the switch and, hence, a split occurs on the chain.
Not a Split but a Maintenance Upgrade
The ethereum hard fork is not a proposed split but a maintenance upgrade.
Bitcoin’s price fell before the Bitcoin Cash Hard Fork. Bitcoin Cash experienced significant surges in 2018. However, when Bitcoin Cash experienced a hard fork, it split into BCHABC and BCHSV resulting in the community falling out and prices dropping significantly.
It’s hard to predict the price in terms of how a hard fork will affect it. Prices may increase as we move closer to the fork, but it’s left to anyone’s guess as to whether the price will increase or decrease.
The ethereum development core, as well as the community, have been feeling quite a lot of pressure from protocols like EOS, Cardano, NEM and Zilica; where ethereum’s performance has been severely lacking as far as through-put or transactions per second, coupled with the high cost of gas required to develop smart contracts.
The developments to the ethereum network are meant to improve the speed, efficiency, and effectiveness of smart contracts, along with lowering gas fees.
EIP — Ethereum Improvement Proposal
Ethereum Improvement Proposals or EIP are proposals made by members of the community. Anyone in the ethereum community can submit a protocol proposal. Post issuing the proposals, the development core conducts a meeting call where they take a call in terms of what will go through and what won’t.
The Constantinople hard fork will happen around the block height 7,080,000 and will introduce five EIPs to the ethereum ecosystem.
I. EIP145 — Bitwise Shift Instructions
This proposal allows for the less usage of gas while making smart contracts cheaper by the shifting the way the code is written or read. It works towards decreasing the use of gas and making smart contracts cheaper.
EIP 145 was developed by two ethereum developers, Alex Beregszaszi and Pawel Bylica.
II. EIP1052 — Hash of the Smart Contract
The proposal suggests that instead of having to pull code from an existing smart contract into a new smart contract, one can just take the hash idea of the existing smart contract. By doing so, one smart contract will be able to verify and check whether another smart contract is valid. This would enable smart contracts to become more efficient, cheaper to develop and improve.
EIP 1052 was authored by Nick Johnson and Pawel Bylica.
III. EIP1283 — Data Storage
This proposal is all about a better pricing structure for data storage, to run decentralized applications. The focus is on memory usage and differentiating it from the storage that goes onto the actual blockchain. It was written in a bid to improve the running of decentralized applications; to compete with EOS, Zilica and other 2.0 blockchains.
EIP1283 was written by Nick Johnson.
IV. EIP1014 — State Channels on the ‘Lightning Network’
State Channels on the Lightning Network is still theoretical. The goal, however, is to improve transactions per second and throughput. This proposal will allow for some transactions to be performed off-chain that are off the main ethereum blockchain. This is will be done to reduce bloating, to reduce fees, and to improve the actual applications that need to be placed on to the ethereum blockchain.
This proposal was written by Vitalik Buterin himself.
V. EIP1234 — Reduced Block Reward
EIP1234 is perhaps the most controversial proposal as it involves reducing the block rewards from 3 blocks to 2 blocks. Conventionally, when a new block is mined, miners would get 3 ethers. However, after this proposal, miners will only get 2 ethers. This is expected to decrease supply, lower inflation and stabilize prices. This will make it better for investors to purchase in the long-run.
This is, essentially, the switch from proof-of-work to proof-of-stake. The mining community doesn’t like this proposal as it basically cuts their mining rewards by ⅓. A lot of people are speculating that this move might potentially destabilize the ethereum network if enough miners leave before ethereum switches to a proof-of-stake model.
Delaying the Difficulty Bomb
The core developers also have to delay the ‘Difficulty Bomb’, which was built into the ethereum network upon its creation. This essentially allows for a yield curve in terms of the ability to mine ethereum blocks. As time passes, one can no longer mine ethereum after a certain point, resulting in what is known as the ‘Ethereum Ice Age’. A reduction in block rewards and transition to proof-of-stake will result in the network delaying the ‘difficulty bomb’. This means mining can happen at a continuous and faster rate and will incentivize miners.
EIP1234 is doing 2 things:
- It is reducing the rate of inflation for the non-capped inflationary currency.
- It is allowing miners to mine at a rapid rate.
EIP1234 has been ‘championed’ by the release manager of Parity, Afri Schoedon.
Ethereum Classic Vision (ETCV) and Ethereumnowa (ETN)
Along with the Constantinople hard fork, there was some talk of two other forks taking place;
Ethereum Classic Vision (ETCV) and Ethereumnowa (ETN).
Members in the ethereum community have largely called out both these forks to be scams. According to a report, the two hard forks are aimed at stealing users’ funds. Ethereum Nowa claims to be an Ethereum hard fork while Ethereum Classic Vision claims to be forking from Ethereum Classic.
The websites for both; ETCV and ETN have been suspended, confirming the bias that both turned out to be fake forks aimed at stealing ether from users.