The Constantinople upgrade for Ethereum that was to take place on the 16th of January 2019 at block #7080000, has been delayed again due to security vulnerabilities in one of its software update. In view of this hard fork update that might occur soon, here’s what to expect.
Ethereum, the leading platform for Smart Contracts is designed mainly for the development of complex DApps (Decentralized Applications). It is designed with four main updates with the ultimate goal to move from Proof of Work (PoW) to Proof of Stake (PoS) protocol and solve the problems related to mining and scalability.
The Constantinople hard fork system upgrade
Constantinople is Ethereum’s next hard fork system upgrade, a part of its journey to the ultimate Serenity upgrade which implements the revolutionary Proof of Stake protocol. Although the upgrades were planned at the time of Ethereum development, the Constantinople upgrade was delayed due to a consensus issue.
However, on 6th December 2018, the core developers at Ethereum voted to proceed with the upgrade, to be implemented at block #7080000. With the average block time clocked at 14.5 seconds approximately, the estimated date of the Constantinople hard fork implementation was to fall on 16th January 2019. The upgrade has been delayed yet again as security researchers identified a potential vulnerability in one of its software upgrades.
The Ethereum Improvement Proposals
The Constantinople hard fork upgrade incorporates five different Ethereum Improvement Proposals (EIPs) to level the transition of protocols from Proof of Work to Proof of Stake. Once released, they are expected to fundamentally change the Ethereum blockchain with a series of new updates that do not provide backward compatibility.
The lack of backward compatibility will mean that the nodes should either update synchronously with the entire system or will continue running as a separate blockchain entity. The Ethereum Improvement Proposals is also expected to tackle cost, functionality, speed and miner issues. The different proposals are as detailed below.
EIP 145: Bitwise Shifting Instructions [For speed and Efficiency]
EIP 145 appends Bitwise Shifting Instructions to the EVM (Ethereum Virtual Machine) for improved speed and efficiency. The instructions allow for the shifting of bits in binary information. This enhancement provides for the execution of shifts in smart contracts at ten times the cheaper rate.
EIP 1014: CREATE2 [For Scalability]
EIP 1014, also known as CREATE2, is developed by Vitalik Buterin to improve scalability. The CREATE2 upgrade enhances the working of State Channels, an Ethereum scaling solution based on off chain transactions.
EIP 1052: Smart Contract Verification [For Speed and Energy]
EIP 1052 allows smart contracts verification by simply pulling the hash of the other contract. Before Constantinople update, a smart contract had to pull the complete code to verify another contract, which took a lot of time and energy to perform.
EIP 1283: SSTORE [For reducing cost]
This Ethereum Improvement Proposal, also known as Net Gas Metering for SSTORE without Dirty Maps is developed to reduce the gas cost for SSTORE operation. The reduction in gas cost will enable the processing of multiple transactions at a cheaper cost.
EIP 1234: Block Rewards & Difficulty Bomb Delay
The EIP 1234 proposal is one of the most widely discussed Constantinople upgrade. This is mainly due to the two main components included in the proposal namely Difficulty Bomb Delay and Block Reward Reduction, which are discussed in detail below.
Block Reward Reduction
With the implementation of Constantinople hard fork, block reward will be reduced to 2 ETH per block from the previous 3 ETH. This is the second block reward reduction in Ethereum history. The Byzantium hard fork conducted in 2017 reduced the block rewards from 5 ETH to 3 ETH.
The reduction in rewards is a part of the efforts to reduce Ether inflation in basic supply and demand economics. Although the supply of Ether is not based on any pre-established limit, a reduction in the inflation rate will help in ensuring scarcity. Ethereum is not the only network to use this strategy. Bitcoin automatically halves its block rewards after every 210,000 blocks to conform to its eventual 21 million Bitcoin cap.
Difficulty Bomb Delay
Difficulty Bomb was originally included in the Ethereum network in September 2015, with the purpose of supporting the transition from PoW to PoS. The mechanism, when activated, will increase the energy required in mining a new block until it becomes impossible to mine a new block. When no new blocks can be mined, the Ethereum network will become frozen.
The Ethereum Improvement Proposal 1234 of Constantinople delays the implementation of this mechanism for the next twelve month, after which it will be voted on again.
The Technical Aspects of EIP Implementation
The Constantinople upgrade is a hard fork that will create a new, second Ethereum blockchain with the EIP implementation. This is not expected to be a contentious hard fork and the miners are likely to switch to the new chain. The current smart contracts on the present Ethereum blockchain will be replicated on the new chain.
The implementation of Constantinople upgrade is expected to bring about the following changes.
The transaction time of Ethereum is expected to be approximately 15 seconds. The complete implementation of PoS is likely to ensure faster transactions with increased reliability.
Cost of transaction
The cost factor mainly depends on the quantity of transactions. However, with some of the EIP’s expected to optimize smart contract interactions, the transaction costs are to decrease.
Number of transactions per second
The optimization of state channels with EIP-1024 could bring about some changes in the average number of transactions per second.
PoS instead of PoW
Constantinople upgrade is one step towards the realization of the PoS protocol. A lot of testing and research is going on. Eventually, the sharding and beacon chain will be added with subsequent updates.
After the upgrade implementation, the old ETH blockchain may hold some value till the time miners completely switch to the new chain. However, there wouldn’t be any more planned updates for it, which will push the original Ethereum blockchain close to $0.
As mentioned before, Constantinople upgrade will implement the EIP 1234 which includes the implementation of block reward reduction. This reduction of block rewards from 3 ETH to 2 ETH per block is termed as Thirdening. This reduction is a reward adjustment of -33% and hence the name Thirdening.
The Block Reward Projections- post thirdening
From the average data collected by Etherscan over the past year, the supply of ether increases by 20,300 Ether per day. When the rewards are reduced to 2 ETH/block by the upgrade, there will be a reduction of 33% ETH in the reward for every regular block mined. In short, after the Constantinople hard fork, the total new Ether supply will reduce from 20,300 ETH/day to 13,400 ETH/day.
The Miner Response to Thirdening
A natural reaction towards the reduction in rewards would be a decline in the number of miners in the network. However miner response is not easily measurable. It depends on a number of factors such as the price of electricity, hash rates, the difficulty of mining and price of Ether.
The Constantinople upgrade and thirdening are exciting developments for the Ethereum network. The global community of Blockchain enthusiasts are awaiting to see what’s there in the more planned updates for the first Ethereum blockchain, which should eventually push the original ETH blockchain close to $0.