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Ethereum is preparing for its next important milestone, the hard gallows of Constantinople.
In this article, we will discuss what it means for the Ethereum the fork of Constantinople, its implications for the future of the network and its potential impact on the market value of Ether.
In short, the launch of Ethereum was planned in four phases: Frontier (the beta phase to develop and test decentralized applications (dapps)), Homestead (to stabilize the platform), Metropolis (in progress) and Serenity (coming soon) .
The second update of Metropolis's Hard Fork, called Forcella di Costantinopoli, should have been finalized on August 13, 2018, tested for two months and published within the second week of October. However, the fork was postponed to January 2019 after developers detected errors in its program during the test period.
This delay certainly exerted further pressure on the value of Ethereum in the last few months of 2018, bringing the price of Ether to below the $ 85 threshold in mid-December. As such, the value of ETH reached 94% from its peak of $ 1,389 reached on January 15, 2018. Ethereum even lost its position as the second largest cryptocurrency by market capitalization to Ripple, as a result of a divergence of negative price compared to its principal peers.
So, the least we can say is that Ethereum has had a difficult year.
Today, with the global recovery in cryptocurrency prices, Ethereum rebounded 84% against the US dollar from its December low; ETH / USDT has advanced by $ 155 and Ethereum has regained its position as the second most popular cryptocurrency in the market behind Bitcoin.
If the recovery of ETH could continue it may depend on the next hard fork.
The hard fork of Constantinople, long awaited by Ethereum, is now scheduled for mid-January. There are market rumors based on the Ethereum team, which led Péter Szilágyi's predictions, according to which the fork could become effective by January 16th.
A quick glance at the rigid gallows of Constantinople
The constant obstacle of Constantinople is important, as it aims to facilitate the passage from the current work trial protocol (PoW) to the stake test protocol (PoS), which should be achieved by the last phase of the development of Ethereum. plan, called Serenity. The PoW – PoS transition is a fundamental consensus change and could be a turning point or breakthrough for the Ethereum network.
The proof-of-work, also used by the Bitcoin protocol, requires "miners" to solve complex mathematical enigmas in exchange for a reward. This is called mining and the first miner to solve the problem is rewarded with units of the "mined" cryptocurrency.
As the miners become more efficient in solving complex mathematical puzzles, the difficulty of calculations increases to keep the average time of extraction stable in terms of time. Thus, the PoW protocol consumes more and more energy and tends to consolidate power in the hands of the big miners.
The game test, on the other hand, will allow the miners who hold the largest share to create a new block. In contrast to PoW, the "miners" in a PoS environment are not rewarded by the creation of cryptocurrency but a transaction fee. As a result, they are called "fakes" rather than "miners".
PoS consumes less energy significantly and significantly cheaper. It is better suited to support network scalability and lower long-term costs. This is why Ethereum aims to switch to the PoS protocol.
To do so, Ethereum has developed a procedure to gradually increase the level of difficulty for miners, called "difficulty bomb", in September 2015. By making the extraction process gradually less profitable for miners, the bomb aims to facilitate the movement from PoW to PoS.
In an effort to smooth this PoW-PoS transition, the EIP 1234, as proposed for the hard fork of Constantinople, will delay the intensity of the "difficulty bomb" and lighten the reward for the blocks extracted from three to two. Ether. As a result, the PoW-PoS transition should be delayed by 5 million blocks and should take approximately twelve months. As such, the delay will help keep the PoW protocol unchanged for a longer period of time, albeit with lower mining remuneration, and will have a less abrupt effect on the transition.
Thus, among the five EIP proposals (Ethereum Improvement Proposals) for Constantinople's fixed fork, EIP 1234 is the most discussed and significant update for miners.
The other four proposals, EIP 145, EIP 1014, EIP 1052 and EIP 1283 – which we will not cover in this article, also concern the reduction of complexity for developers and the reduction of gas costs (operating costs).
As a final remark, many crypto-dealers have certainly heard of Ethereum Casper. Casper is the PoS protocol that the developers of Ethereum have decided to adopt; aims to punish malicious validators.
Risks related to the hard gallows of Constantinople
Ethereum goes very well before the fortress of Constantinople. Still, there are risks related to the upcoming event.
First of all, there is a risk of delay. At this point, there is no certainty about the date of the rigid fork. As mentioned earlier in this article, the fork of Constantinople has already been delayed for several months. A slight delay will certainly not be a major problem for the market, however a significant delay will raise questions about Ethereum's ability to keep pace with its four-step development plan, could again damage the sentiment in Ethereum and trigger a new sell-off.
Secondly, there is the risk of acceptance. The PoW – PoS transition is a fundamental change for the Ethereum network. While PoS should allow indefinite network downsizing, it is not effective in managing the worst scenarios, according to many miners. These scenarios include rarely occurring events, such as stolen private keys or network interruptions, which could have a significant impact on activity and network security. In case of stolen keys, bad actors would take control of the network. While in the case of network interruption, the nodes would have difficulty reorganizing themselves. This is because the nodes in the PoW setting would automatically be tempted to reorganize and gravitate to a single chain in the event of an unexpected event. However, in the context of the PoS, there may be confusion about which chain is canonical, provided the PoS does not focus on the authenticity of the chain.
Furthermore, some miners will certainly be opposed to the transition from PoW to PoS, as this would shift the balance of power from miners to interested parties.
If all miners do not switch to the new PoS protocol, Ethereum's blockchain could bifurcate. This is because the new blockchain would become incompatible with the old chain that follows the series of updates.
Nonetheless, this is not the basic scenario in the short term. Constantinople's hard fork is considered "non-contentious", so most developers would have to switch to the new protocol, leaving the Ethereum blockchain intact after the update.
The question of a "controversial" fork will probably be raised in the later stages of the Ethereum protocol change.
Do not get influenced by the Bitcoin Cash rigid fork
When it comes to hard forks, the November Bitcoin Cash fork is still very fresh in the minds of traders. Although it was not expected that the BCH rigid swingarm would translate into two separate blockchains and a strong market sell-off, there were important red flags heading towards the BCH hard fork.
But this is not the case for the incumbent Fork of Constantinople of Ethereum.
Operators should remember that technological updates are necessary and unavoidable in the context of cryptocurrencies. Obviously, the fact that there is no guarantee of a smooth transition is a risk that should be managed by traders. Ethereum may be subject to greater price volatility until the fixed grip of Constantinople and the days following the fork.
However, the hard fork is expected to release some tensions regarding Ethereum and may be positive for Ether's market valuation in the near future.
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