On January 16th, 2019, Ethereum is supposed to undergo a hardfork known as Constantinople. Though many people are viewing this network upgrade as a “new” hardfork, it is actually the second phase of “Metropolis“; the name of the overall systems upgrade. The first phase was called “Byzantium” and was successfully implemented in October of 2017. Before diving into the specificities of Constantinople, let’s take a step back and look at what a hardfork really is.
What Is A Hard Fork?
Per the great minds over at Investopedia, a hardfork can be defined as a radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa). This requires all nodes or users to upgrade to the latest version of the protocol software. So in laymen’s terms, a hardfork is essentially an upgrade to the system. However, since the network is collectively compromised of nodes rather than a singular entity, upgrading a decentralized system is not as easy as upgrading a centralized system. Every node that makes up the network has to install this newer version of the protocol.
Will New Coins Be Produced?
When communities can’t agree on which direction to take the network, a contentious hard fork typically occurs. Contentious hardfork’s occur when half of the developers and miners will stay on one blockchain, while another group of miners will transition to the new chain. Because not all of the community has migrated to the new chain, this means that both chains remain functional. Due to this, the new chain also must mint a new coin for facilitating trade and engagement on the network. We saw this from the contentious hard forks of ETH, which forked into Ethereum Classic (ETC), and Bitcoin which forked into Bitcoin Cash (BCH). However, Constantinople has been apart of Ethereum’s development roadmap for quite some time, so it is highly unlikely that this hard fork will create new coins as the majority of Ethereum’s community supports the fork and the ensuing changes to the protocol.
How will Constantinople effect the Ethereum Protocol?
The Constantinople hardfork is a critical step towards Ethereum transitioning from Proof-of-Work to Proof-of-Stake. Proof-of-Work is the current process by which new transactions are verified, and blocks are added to the network. Proof-of-Work essentially requires you to allocate your devices computational power to solve a cryptographic problem. When the problem is solved, a new block is added onto the blockchain, and within that block are newly verified transactions made on the network. The person who was responsible for mining that block gets a reward. While Proof-of-Work has been effective to some degree, as digital assets continue to mature, the competition for mining has gone up. The result of this has been an inflation in the cost of mining equipment, so mining has slowly become less profitable as competition and the cost of mining both continue to increase. Moreover, due to the amount of energy mining requires, it is incredibly harmful to the environment. To contextualize how much energy is required to maintain the Bitcoin network, the Guardian recently reported that Bitcoin mining consumes more electricity in a year, then the entire country of Ireland.
Proof-of-Stake aims to solve this problem so that instead of miners being rewarded for how much “work” they perform (how much energy they allocate towards solving the cryptographic problem), they will instead be rewarded for how much they “stake”. In other words, in a POS system, verifiers will “stake” their coins and earn a small reward every time they validate the information correctly. If they make a mistake, they lose a part of their stake.
The block reward is also going to decrease after the Constantinople hardfork from 3 ETH/Block to 2 ETH/Block. While the reduction in rewards will upset some miners, the processing speed and scalability will improve. This will be very beneficial to smart contract developers, as the fees associated with designing decentralized applications will be greatly reduced. This is a necessary step towards creating a more consumer-ready product as developers will be able to build more sophisticated decentralized applications.
Is My Ethereum Secure?
Yes. Popular exchanges such as Bibox, Binance, and of course, LinkCoin have all already come out and said that they are supporting the upcoming Ethereum hardfork.
Are my ERC-20 and ERC-721 Tokens Secure?
Yes. Since this is not a contentious hardfork and no new coins are being produced, all ERC-20 and ERC-721 tokens will migrate to the new blockchain just like all of the existing Ether will carry over to the new chain.
Where to Next?
2017 saw the whole cryptocurrency industry undergo meteoric growth. News and pop-culture propped up the industry to unsustainable levels. In 2018, we finally saw the market correct itself with the prices now reflecting the underlying technology, rather than the excitement from the market. If we are to see positive growth that looks anything like the gains from 2017, we cannot rely on generating buzz and excitement. Instead, the only metric that will push the industry forward is tangible technological growth & development. Constantinople is the next phase of development for the Ethereum protocol, and will hopefully take the network one step closer to achieving the bold claims that the market got so excited over when its price exploded in 2017.
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