You’ve heard about it in the news… well on the internet, whether it was YouTube, a Podcast, Twitter, or some Cryptocurrency forum or news site. Constantinople. No, not the ancient city. The Ethereum hard fork.
The Constantinople hard fork is part two of five in a series of upgrades known as Metropolis. The first upgrade was titled Byzantine and took place at block number 4,370,000 in October 2017. Coming up at block 7,080,000 sometime between 14 to 17 January 2019 the Constantinople hard fork will deploy. Most believe it will occur on 16 January 2019.
First, What is a Hard Fork? If you already know, skip ahead!
You must understand what a hard fork is to begin with. If you’re a crypto expert or you already know what a hard fork is, skip ahead to the next section, “what to expect”. The Ethereum Cryptocurrency is a protocol. A protocol is not a single object or a particular program with a central source. A protocol is a set of rules that govern how information on that system is communicated. In particular with cryptocurrency, a protocol includes whether or not the system keeps actors honest with PoW (proof-of-work), PoS (proof-of-stake), PoA (Proof-of-Authority) as well as how many “coins” of that particular crypto are mined per block on the blockchain, and many other computer science things such as how information is read, shared, edited, exchanged, etc.
Conceptually speaking here, the Ethereum protocol runs a blockchain and a new block is created approximately every 15 seconds. The blocks are constructed in a chain and the chain represents that particular protocol. Whenever the core protocol is changed, then the chain diverges, as a new protocol will by definition, create a new chain. Whether or not this chain becomes the dominant chain is dependent on how many nodes/miners support the chain by adding new blocks. The dominant chain is determined by chain length.
You can have a contentious or non-contentious hard fork. A contentious hard fork is when members of the community running nodes of a cryptocurrency do not agree on the proposed protocol change. One group agrees and makes the switch, supporting the new chain (new protocol). The other group does not agree and continues to support the old chain by running the old protocol. Examples of contentious hard forks are Bitcoin/Bitcoin Cash hard fork. The Ethereum/Ethereum Classic hard fork. The Bitcoin Cash/BitcoinSV (satoshi vision) hard fork. There are many more, but you get the gist.
Hard forks can be “bad” for a cryptocurrency if there are too many contentious hard forks. A hard fork itself is basically a big protocol upgrade/change. If it is contentious then the community does not agree and then you end up with twice the number of coins split into two slightly different currencies (different protocols). This can be bad because people will lose faith in the currency (protocol) as well as being upset at the inflation of doubling the available supply (even though they would technically be on separate blockchains).
Fortunately, the Constantinople hard fork is non-contentious. That means that everyone in the Ethereum community agrees on the protocol updates, making Constantinople more of a big protocol update than a hard fork, in that it will not create a split in the blockchain/no new chain, so no new cryptocurrency out of it. But more on that below.
What to Expect from the Ethereum Constantinople Hard Fork
Constantinople is part of a series of upgrades to the Ethereum protocol that is steadily transitioning Ethereum from proof-of-work to proof-of-stake. The Constantinople upgrade consists of five main components, described below. Each component is described as an “EIP” (Ethereum Improvement Proposal) that developers in the open source world of Ethereum can propose to the Ethereum Foundation/Developers for consideration. They can be edited/tweaked to avoid bugs and then tested, and tested again and then implemented.
1) EIP 1283 Net Gas Metering for SSTORE Without Dirty Maps – is an upgrade proposal that decreases the cost of gas (ether) for contracts to be updated and executed.
2) EIP 1014 Skinny CREATE 2 – proposes new types of layer two state channels that basically allow for cheaper on-chain deployment costs. This upgrade will impact future ethereum features such as allowing upgradeable contracts.
3) EIP 145 Bitwise Shifting Instructions – essentially means that execution of contracts will be significantly cheaper. It will add ‘bitwise shifting instructions’ to the EVM (Ethereum Virtual Machine) and allows for binary information to shift both left and right.
4) EIP 1052 Smart Contract Verification – allows smart contracts to verify other smart contracts simply by the hash, rather than by the entire code of the contract, which will decrease time and work needed to recognize/verify other contracts.
5) EIP 1234 Block Rewards & Difficulty Bomb – is an upgrade that (i) decreases the block reward from 3 ETH to 2 ETH, known as the “thirdening”; and (ii) delays the deployment of the Ethereum Difficulty Bomb. The Difficulty Bomb progressively increases the difficulty of the PoW problems so that the block mining time increases to the point where essentially no new blocks can be created, leading to what is known as the Ethereum Ice Age.
Discussion of the Constantinople Hard Fork
Let’s be honest: the first 4 upgrade proposals above (EIP 1283, EIP 1014, EIP 145, and EIP 1052) are all good and dandy. We all want a faster, easier to use Ethereum. The only worry that I have, as I am sure others have as well, is whether or not the code is error-free. After all, humans are coding it. And humans make mistakes. That being said, the Constantinople upgrade has been tested multiple times (once in October 2018 and they found bugs so they delayed it until now). They are currently running a testnet for Constantinople and I haven’t heard any bad news yet.
Moving on… the EIP 1234, the block reward decrease (and difficulty bomb) is more contentious. The decrease in the block reward has a two-fold impact. One is that it will increase scarcity by decreasing the amount of future ETH to be mined (the future supply), which by definition will increase the value of ETH (even if demand stays current or increases). However, miners are worried that the decreased block reward will reduce their profitability and thus their ability to continue their mining businesses. This is not simply just a concern for their mining business though. It is a concern for all who love, support and use Ethereum. Since if there are fewer miners, then the security of the Ethereum network will decrease. The security of the Ethereum network is actually quite critical and very important to its continued existence and usage.
In a perfect world, the price will increase to reflect steady demand for ETH based on 2 ETH/block that is equivalent to the demand for 3 ETH/block. However, what plays out, in reality, is yet to be known. Fun fact, the Byzantine upgrade reduced the block reward from 5 ETH to today’s 3 ETH. Things turned out alright so far.
Looking at the price chart for Ethereum, it had dropped to a low of about $83 USD in mid-December 2018, and has been on a steady incline to almost double at $159 USD just about a week ago (approx. 5 January 2019) and is sitting today (12 Jan 2019) at about $128, which is still an impressive 54% increase in less than a month.
Furthermore, the difficulty bomb… it will be delayed by 12 months and then voted on again. The Ethereum Foundation wants to move towards a PoS protocol and move away from the PoW protocol. The difficulty bomb in effect does not give miners the opportunity for a contentious hard fork since if implemented, the miners will not be able to continue mining for very long (due to the impeding Ethereum Ice Age). If the miners wish to fork and continue mining ETH, while others in the Ethereum community transition to PoS then theoretically, in an open source system they should be allowed to. After all, the DAO hack lead to ETH and ETC.
Arguably this is a bit of crypto-dictatorship occurring here… Don’t get me wrong, I am very pro-Ethereum, I support the project and protocol. However, given the open source nature of public cryptocurrency blockchains, if miners want to continue mining and cause a contentious hard fork, leading to two Ethereuems (a PoW version and a PoS), potentially ETHW (Ethereum Work) and ETHS (Ethereum Stake) then this should be allowed. If the PoW protocol is truly inferior it will fizzle out and die off. Similar to the Ethereum Classic fork that recently suffered a bad 51% attack. I won’t touch ETC (Ethereum Classic) with a 10-foot pole.
Do you need to do anything if you own ETH?
If you own the Ethereum token, ETH, you do not need to take any action to support this upgrade. There should be no new coins created. There is no update that you need to do, regardless of whether or not your coins are on a cold wallet, hot wallet, or exchange. Remember your actual “coins” do not exist/live on your cold wallet, only your private keys. The public ledger will be updated and your private keys will remain unchanged.
Only miners/Ethereum nodes and exchanges will have to update to the new protocol.
Anyway, those are my thoughts. I am pro-Ethereum and hope that the Constantinople hard fork goes well! And that any errors/bugs are minimal and caught and fixed immediately without any trouble. I’m basically asking for perfection.
Let us know what you think in the comments!