The Ethereum Hard Forks

Three Ethereum hard forks were scheduled for this month: Ethereum Classic Vision, Ethereum NOWA, and Ethereum Constantinople. These forks will result in ETCV and ETN coins as well as ETH’s code update respectively. Though there are three forks happening, the Constantinople hard fork will continue to be ETH since it is not a traditional hard fork.

What is a Hard Fork

Traditionally a hard fork is defined as the divergence of the protocol on a blockchain. Basically, the nodes that run the network do not agree to update. Those who update are not backward compatible with those who do not. As an example Ethereum (ETH) forked into Ethereum Classic (ETC) in 2016 after the DAO hack, ETH rolled back the hacked transactions and ETC did not, creating two coins.

Ethereum Classic Vision and Ethereum Nowa

Ethereum Classic Vision would bring together the best of ETC: its true decentralization, and Proof of Stake mining and sharding. ETCV would lower mining costs while requiring simpler hardware. The Proof of Stake system allows holders to earn more coins by staking them rather than selling them will increase the coin’s value. The Ethereum Classic Vision dApp (decentralized Application) platform would feature both back-end and front-end development tools, enabling the users to build attractive applications. Its network can process up to 10,000+ transactions per second (TPS) up from ETH’s only 25 TPS.

This fork was set to take place January 11th, 2019.

The Ethereum Nowa hard fork was slated to happen just a day after the Classic vision hard fork, on January 12th, 2019. ETH owners would get 1 ETN coin for every ETH in their private wallets.

Constantinople: The Fork that Matters

Ethereum announced the upcoming hard fork Constantinople, set to take effect between the 14th and 18th of this month, it will be initiated at block 7,080,000. Unlike traditional cryptocurrency hard forks, ETH’s upcoming fork will not leave two coins in its wake. This fork is more a system upgrade than past forks, as such, it is worth looking into why, what it means now, and going forward.

What’s Happening

Five changes to ETH constitute the Constantinople hard fork known as Ethereum Improvement Proposals (EIPs). The updates will reduce “gas”/ transaction costs, increase speed, lowers miner rewards to 2 ETH from 3, and delay the difficulty bomb. These upgrades are meant to prepare Ethereum for the future. For a more detailed explanation of the intricacies of these proposals check out this article.

These changes were agreed upon by a majority vote of the network’s nodes. Since the updates were approved by the majority it is expected that all nodes will update, unlike past hard forks.

Why

Beyond the specifics of what these updates will do for Ethereum are the reasons they are being implemented. ETH has fallen behind in terms of transaction speed and transactions per second to other platforms like EOS, Ripple, and NEM.

Constantinople’s transaction fee reductions will result in more complex dApps and smart contracts to cost less easing pain for developers and users alike.

Lowering miner rewards to 2 ETH from 3 ETH is meant to decrease inflation and prepare the community to switch from Proof of Work (PoW) to Proof of Stake (PoS).

Meaning rather than miners receiving rewards for creating a block - PoW, community members stake around $10,000 USD to monitor transactions and collect the rewards - PoS.

Slowing inflation is intended to increase demand and return stability to the currency. Dropping the rewards by 1/3 is intended to decrease the profits for miners to a point at which a Proof of Stake system works better for everyone. This could be the most problematic update since most miners have made it their career and with the decrease may not be able or willing to put forth the stake necessary to continue earning from the platform.

The difficulty bomb is the name given to the increasing difficulty level of puzzles in the mining algorithm used to reward miners. It will become impossible to create new blocks as the puzzle will be unsolvable; another reason why ETH is looking to switch to Proof of Stake.

What the Future Holds

Looking toward the future, it is still difficult to say what will happen. Riding the wave of excitement into 2019 Ethereum had taken back its second place spot in the market cap standings from Ripple; only to lose it again.

Decreasing inflation will likely strengthen ETH’s stability. Whether that will result in higher values is yet to be seen. Economically speaking the price increase should be inevitable, but crypto assets do not always behave as they should. However, in the long run, it will have the desired effect, especially if the switch to Proof of Stake takes place without splitting the community in two.

Increasing speeds and lowering costs will do wonders for the future Ethereum has been striving toward as the main platform for blockchain advancements. Taking steps to ensure this position will likely return investors interest not only in ETH itself but many of the projects being created for the Ethereum network.

In a post ICO boom crypto space, the hope of fast cash is no longer what seasoned investors in the space are looking for; proof of longevity is why people will return. Showing that its network can have a full update determined by a majority will allow people outside of the crypto sphere to begin to establish trust in ETH. Constantinople could be setting a precedent for hard forks to come.

Conclusion

In the immediate future volatility will continue, especially with the FUD surrounding the Ethereum Classic Vision and Ethereum Nowa forks. If the Ethereum Constantinople hard fork has no major hiccups upon implementation ETH will likely take back its spot at number two. Though if there are unforeseen complications some time will be needed before ETH sees steady gains.

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