Finance

The Upcoming Hard Fork Challenges Ethereum’s (ETH) Developers

How to Satisfy Miners and Investors?

The Ethereum’s (ETH) Constantinople upgrade is giving a fair amount of a headache to the Foundation’s team of developers as they are trying to satisfy both factions of the community – miners and investors.

What is Constantinople?

As a second phase of the Metropolis hard fork, Constantinople is a system-wide, backward-incompatible upgrade of the Ethereum network, aimed at optimizing the network, increasing efficiency and reducing transaction fees.

The first phase happened in October 2017, when the development team implemented Byzantium upgrades into the system to lay down foundations for the upcoming changes.

Various Factions – Various Interests

Three of the four planned Ethereum Improvement Protocols (EIPs), EIP 145, EIP 1014, and EIP 1052, are completely non-controversial, while the EIP 1295 protocol definitely stirred the debate among the network’s key participants.

Brian Venturo, CTO of a mining startup named Atlantic Crypto recently stated that he supported the EIP 1295, which keeps the mining rewards at the current level, because the security of the Ethereum network is not something to compromise over.

“If you reduce the block reward you’re going to price out a large proportion of hardware,” he said, and insinuated that the network could be more vulnerable to malicious attacks.

However, Venturo’s stance was brought into question by the fund-manager Spencer Noon, who said that he is unsupportive of EIP 1295 and questions the Atlantic Crypto’s motives.

“ACC (Atlantic Crypto Corp.) is a mining company run by former hedge funders. This has nothing to do with “network security” – a block reward reduction would hurt their bottom line,” Noon revealed his honest opinion on Twitter.

Of course, miners have everything against the reduction of miner’s rewards, while investors keep pointing out that the price of Ethereum is rapidly plummeting.

The latter feel that, by restricting the issuance of new coins, the scarcity would be created, which would, in turn, have a positive effect on the price of their favorite investment.

The Community is on Fire

The fierce discussion has flooded over the Twitter barriers and captivated a much wider audience.

In the Reddit thread exclusively dedicated to the topic, many users went head on to defend their point of view – to lowe or not to lower the current 3 ETH mining reward.

Reddit user SaiLyfee said: “2 ETH most certainly is not the real compromise here. 1,5 ETH is the real compromise between 1 ETH and 2 ETH. 3 ETH should not even be being considered.”

Ethereum is Approaching a “Difficulty Bomb”

Ethereum has a pretty high inflation rate of ~7.5% and has paid $6.6 billion to miners in the past 365, which makes mining a very lucrative business.

Nevertheless, by such usage of the network, Ethereum is quickly reaching the “difficulty bomb.”

The “difficulty bomb” was originally implemented to the Ethereum network to bring a shift from a proof-of-work (PoW) algorithm to a proof-of-stake (PoS) algorithm by reaching difficulty high enough for mining to become unlucrative.

If the preparations for this event would not be met, “difficulty bomb,” which is set to “explode” in early 2019, could push the mining difficulty to such high levels wherein the transactions can’t be processed, consequentially pushing the Ethereum network into oblivion.

This ticking mechanism means that developers are currently under a lot of pressure to upgrade the code and settle all disputes before the bomb goes off.

Related post:

Ethereum’s Vitalik Buterin Speaks About Blockchain, its Future, and Cryptoeconomics

Luka Kapetanic

An ex-restaurant business owner turned cryptocurrency fanatic, with over 12,000 followers on investfeed.com. Miner, Investor, trader and, above everything else - a writer, with coinlive.io, and cryptodigest.com in his jobs portfolio.

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