When the Ethereum (ETH) blockchain reaches block 7,080,000, a hard fork is expected to occur. The forked blockchain will be called ‘Ethereum Constantinople.’ It is the second phase of the third stage of the Ethereum roadmap.
Constantinople’s release will possibly aid in the transition from Proof-of-Work (PoW) to a Proof-of-Stake (PoS) protocol on the ETH network. While this might help solve many of the problems associated with PoW, it might also increase the influence of financial institutions within the crypto asset industry.
The Four Stages of Ethereum
To move from one stage of the Ethereum roadmap to the next requires a hard fork. Each new stage’s fork implements a series of Ethereum Improvement Protocols (EIPs). The EIPs upgrade and improve various features of the ETH network.
When the final stage is reached, Ethereum is expected to cease using PoW completely. A unique PoS consensus algorithm has been announced as its replacement.
The four announced stages are:
After the Olympic Testnet, Frontier was released as Ethereum’s first version for mainstream adoption and usage. It was released in July 2015 and offered the earliest tools for developing and building decentralized applications (dApps) on the Ethereum platform. As well, it introduced PoW as Ethereum’s first consensus algorithm and consequently introduced Ether mining.
On March 14, 2016, Ethereum hard-forked at block 1,150,000, and Homestead was born. It included many upgrades to Frontier. These increased overall transaction speed and introduced other improvements to the ETH network.
Following the release of Homestead, there were three unexpected hard forks to solve various problems including a hack, excessive network congestion, and a response to the various denial of service attacks on the Ethereum network.
Metropolis (Two Phases):
- Byzantium: On Nov 16, 2017, Byzantium was released as phase one of Ethereum Metropolis. It hard forked from Homestead at block 4,370,000. Notably, it introduced ZK-Snarks to increase the anonymity of transactions and dropped the mining reward from 5 to 3 ethers.
- Constantinople: Byzantium was predicted to hard fork in October 2018. It was delayed. Now, the hard fork has been re-announced for Jan 16. Once the hard fork occurs, five EIPs will be implemented. Together, they will decrease the mining reward from 3 to 2 ethers, allow for less costly gas fees, and increase scalability with the creation of a sidechain, generate addresses for that sidechain, and enable on- to off-chain transactions using the addresses.
Constantinople is tentatively scheduled to hard fork at an unnamed block on an unknown date. This will be the final stage for Ethereum. The cessation of PoW mining and the implementation of full PoS has been discussed in detail by Vitalik Buterin and others.
The Transition to PoS
A piece of code called the ‘difficulty bomb’ was integrated into the Ethereum Virtual Machine. Its purpose was to gradually increase the difficulty of mining ethers. If it is not delayed, it will eventually make mining impossible. Without a replacement or indefinite delays, the ‘Ethereum Ice Age’ will occur.
The difficulty bomb incentivizes the transition to PoS. When Ethereum first launched, PoW was implemented, but the intention to move to PoS was announced as part of the Ethereum roadmap. Constantinople’s release delays the bomb going off for another 12 months while making mining less profitable over time. By decreasing the mining reward, less money can be made by mining ethers and thus make ether mining financially inviable.
While Constantinople aids the transition to PoS, its announced EIPs do not implement a PoS protocol. These protocols are being developed off-chain. Currently, there are two:
Casper the Friendly Finality Gadget (FFG)
FFG is being developed by Vitalik Buterin and implements a hybrid PoW/PoS system. There are two main features of Casper FFG:
- Sharding: Sharding occurs when a side chain will be attached to the Ethereum mainchain. The side chain will be powered by PoS and alleviate the workload of the main chain. Sharding increases the scalability and speed of the Ethereum network while offering the choice between mining or staking ether.
2. Partial POS validation on the main chain: While POW will be used as the primary consensus algorithm on the main chain, POW will pause at every fiftieth block. Transactions attached to these blocks will be validated by using POS. 98% of the blocks on the main chain will, thus, be accomplished using POW while 2% will be accomplished using POS.
Complete by Construction (CBC)
CBC Is being developed primarily by Vlad Zamfir. After the partial transition to PoS using Casper FFG hybrid PoS/PoW protocol, CBC Casper is expected to integrate a full PoS protocol. The unique security features of PoS has also been announced with added security protocols to keep the network safe from bad actors, hackers, and fraudsters.
Exchanges Supporting Ethereum Constantinople
At the time of writing, at least four cryptocurrency exchanges have announced their support for the Constantinople hard fork:
If the Ethereum Constantinople forks as announced, the ETH network will have taken one more step forward toward a full transition from PoW to PoS.
PoW has many problems ranging from the creation of centralized authority by miners and ASIC manufacturers to high energy costs and inefficiency. Ethereum’s plan to move to a PoS protocol solves these problems, however, the Enterprise Ethereum Alliance includes credit card companies, banks, and other financial institutions which might gain increased influence within the crypto industry.
In other words, if the integration of PoS by Ethereum increases its market capitalization, trade volume, or price, it also might increase the unwanted influence of financial institutions. While they might not act as an intermediary between transactions, their influence could become more pronounced. This might ultimately prove problematic toward realizing the Nakamoto Theory of Decentralization.
How do you think Constantinople will affect the crypto industry? Let us know your thoughts in the comments below!