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The problem, moreover, is that there is no way out when we it is about solving the difficulty bomb of this year, some of them will have been implemented. But we will not know what the winning strategy is and this brings instability to the entire Ethereum project. This is a big problem. The market value of the protocol is $ 20 billion. Ethereum is the bastion of Initial Coin Offerings (ICOs), which raised over $ 7 billion in the first half of 2018 alone. There's a lot of money and people tied to that money, in the Ethereum ecosystem.
Let's take a look at the options. The Palio Proof is the most discussed. It is important to remember that this is a first-level solution, which means that it is built on the main chain of Ethereum, rather than being built on it ("off-chain"), which is known as a second-level solution. Proof of Stake (scheduled to go into full effect this year) would see Ethereum pass from Proof of Work – where miners earn ether by competing against each other to solve puzzles – to a system that distributes rewards based on etheric ownership existing. This is the preferred action line for individuals who run Ethereum, because it would introduce scarcity into the system, driving up the price of the ether and, consequently, their property.
Alternatively, things attempting to improve the Work Proof will be attempted. There are several second-level solutions, such as Plasma that will use smart contracts to process transactions performed on secondary blockchains (Ethereum is the mother blockchain), which means that very large volumes of transactions, on different chains can be calculated in one run. This should make it easier to scale the network, but as the business moves off the chain, it could push down the value of the ether. Moreover, it will probably create a huge data storage problem, with the size of the blockchain ethereum growing exponentially.
The solution to this problem is the so-called "sharding" which offers a path to scalability while maintaining security. Currently, every transaction that takes place on Ethereum must be routed through every node in the network. Sharding divides the entire network, at any given time, into partitions called shard – a fixed snapshot, if desired. Thus, some nodes process transactions within some fragments, allowing a higher transaction throughput across the network. One caveat is that if you want to have a "complete" node on your own, you will need to have very sophisticated, businesslike hardware – that is, the role of individuals in an apparently decentralized system has declined.
The point of all this is that the essence of Ethereum will change, and any of these possible ways ahead will win determine how drastic a change is. On the one hand, we could see a protocol controlled by a federation – an élite, probably led by the co-founder of Ethereum Vitalik Buterin probably – of miners led by Proof-of-Stake. The more ether you earn, the more influence you will have on the network. And because the demand increases for the thing you control, the price will probably increase.
On the other hand, however, we could see decentralization last, with reproducing child blockchain and taking much of the work and yield from the mainchain. The vision based on the network and free from the state that has led and leads people into the cryptic world would remain more intact, but the ether could vanish while new projects and tokens continue to rely on it less.
Buterin pointed out that if the Difficulty Bomb is not resolved, the value of the Ethereum protocol can drop to zero. We do not yet know which solution will work, but we know that as many as possible must be proven – although the reason for this is not the preservation of value in ether or Ethereum. Most people who look to the next wave of Internet – Web 3.0 – agree that there is a reasonable chance that we will see more fat protocols and layers of thinner applications emerge – the opposite of what happened before. Whether it's Proof of Stake or a framework like Plasma that generates the next wave of innovation on Ethereum, we could see the reincarnation of increasingly powerful protocols. Investors will not put the money in Ethereum via ether but, through numerous tokens, in the layers of the infrastructure that will allow to write the next chapter of the digital age.
We are expecting exciting times.
I would like to express a short but big thank you to my Coinfirm team. There are over 100 people who are really enthusiastic about blockchain in all forms, without whose experience and assistance writing this would not have been possible.
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The problem is that there is no sure way to solve the bomb of difficulty.There are several possible routes and, by the end of this year, some of the gold have been implemented, but we will not know which s the winning strategy, which brings instability to the entire Ethereum project. This is a big problem. The market value of the protocol is $ 20 billion. Ethereum is the bastion of Initial Coin Offerings (ICOs), which raised over $ 7 billion in the first half of 2018 alone. There's a lot of money and people tied to that money, in the Ethereum ecosystem.
Let's take a look at the options. The Palio Proof is the most discussed. It is important to remember that this is a first-level solution, which means that it is built on the main chain of Ethereum, rather than being built on it ("off-chain"), which is known as a second-level solution. Proof of Stake (scheduled to go into full effect this year) would see Ethereum pass from Proof of Work – where miners earn ether by competing against each other to solve puzzles – to a system that distributes rewards based on etheric ownership existing. This is the preferred action line for individuals who run Ethereum, because it would introduce scarcity into the system, driving up the price of the ether and, consequently, their property.
Alternatively, things attempting to improve the Work Proof will be attempted. There are several second-level solutions, such as Plasma that will use smart contracts to process transactions performed on secondary blockchains (Ethereum is the mother blockchain), which means that very large volumes of transactions, on different chains can be calculated in one run. This should make it easier to scale the network, but as the business moves off the chain, it could push down the value of the ether. Moreover, it will probably create a huge data storage problem, with the size of the blockchain ethereum growing exponentially.
The solution to this problem is the so-called "sharding" which offers a path to scalability while maintaining security. Currently, every transaction that takes place on Ethereum must be routed through every node in the network. Sharding divides the entire network, at any given time, into partitions called shard – a fixed snapshot, if desired. Thus, some nodes process transactions within some fragments, allowing a higher transaction throughput across the network. One caveat is that if you want to have a "complete" node on your own, you will need to have very sophisticated, businesslike hardware – that is, the role of individuals in an apparently decentralized system has declined.
The point of all this is that the essence of Ethereum will change, and any of these possible ways ahead will win determine how drastic a change is. On the one hand, we could see a protocol controlled by a federation – an élite, probably led by the co-founder of Ethereum Vitalik Buterin probably – of miners led by Proof-of-Stake. The more ether you earn, the more influence you will have on the network. And because the demand increases for the thing you control, the price will probably increase.
On the other hand, however, we could see lasting decentralization, with child blockchains that reproduce and take much of the work and yield from the mainchain. The vision based on the network and free from the state that has led and leads people into the cryptic world would remain more intact, but the ether could vanish while new projects and tokens continue to rely on it less.
Buterin pointed out that if the Difficulty Bomb is not resolved, the value of the Ethereum protocol can drop to zero. We do not yet know which solution will work, but we know that as many as possible must be proven – although the reason for this is not the preservation of value in ether or Ethereum. Most people who look to the next wave of Internet – Web 3.0 – agree that there is a reasonable chance that we will see more fat protocols and layers of thinner applications emerge – the opposite of what happened before. Whether it's Proof of Stake or a framework like Plasma that generates the next wave of innovation on Ethereum, we could see the reincarnation of increasingly powerful protocols. Investors will not put the money in Ethereum via ether but, through numerous tokens, in the layers of the infrastructure that will allow to write the next chapter of the digital age.
We are expecting exciting times.
I would like to express a short but big thank you to my Coinfirm team. There are over 100 people who are really enthusiastic about blockchain in all forms, without whose experience and assistance writing this would not have been possible.
