MAJOR UPGRADES TO THE ETHEREUM NETWORK
By statistics, Ethereum is the third-largest cryptocurrency in the digital currency market cap and is also the most popular and sought after platform for programs such as decentralized applications (dApps). This cryptocurrency network has received a series of upgrades over 11 months, which we will discuss in more detail.
WHAT HAPPENS DURING A NETWORK UPGRADE?
Upgrades in the blockchains of underlying network protocols in a cryptocurrency mean that the system is being incorporated with new rules and changes to bring an improvement to the system in the long run.
However, a network upgrade in a cryptocurrency system such as the Ethereum network is no simple task. The actual reason why the upgrade procedure is hectic and confusing is because the blockchain system is decentralized in nature, meaning that in order to successfully implement a network upgrade, there needs to be an established channel of communication with the Ethereum community and developers of various Ethereum clients in order to make sure that the transition from the old network protocols to the new network protocols goes smoothly.
Once the changes in the new upgrade are discussed and outlined along with the approval of the community, the concerned changes are then written into the various Ethereum clients.
These protocol changes then go online (activated) at a defined block number specified before the activation.
WHAT ARE MAJOR NETWORK UPGRADES?
The two major network upgrades which we will discuss today can categorize as an upgrade that has already been rolled out and the network upgrade whose release is imminent in the coming of the next month, December.
Constantinople (Network upgrade rolled out on 16th January 2019)
Istanbul (Network upgrade scheduled on 7th December 2019)
Both of these network upgrades to the Ethereum network are designed to bring in some improvement to the system’s efficiency along with some new rules for the network protocol.
THE CONSTANTINOPLE UPGRADE
Regarding the Constantinople upgrade, here are a few things that are characteristic of this improvement update.
FASTER AND EFFICIENT PERFORMANCE
Generally, Constantinople boasts a total of five EIPs (Ethereum Improvement Protocols. These EIPs are necessary documents that detail the changes and introduces new features brought into the crypto currency's code.
We cannot discuss these EIPs in detail because we might delve into too many technical details, instead, here's we'll touch upon the significant overviews regarding these changes and improvements.
Among these five EIPs, 4 of them (EIP 145, 1014, 1052, and 1283) detail the various improvement in the system's technical functionality, making Ethereum slightly more efficient, cheaper, and setting the foundation for future upgrades.
These upgrades are not noticeable in the day-to-day usage, but these do add-up with stacking updates making Ethereum faster and efficiency considerably.
From the four mentioned EIPs, EIP 1014 is a significant change implemented as this upgrade makes the interaction with Ethereum addresses that haven't been created yet, possible. The reason why this holds importance is because this opens the prospects of being for state channels, which will be a promising scaling solution for Ethereum.
POW TO POS
EIP 1234, the fifth Improvement protocol, brings about two significant changes to the table. The first change is related to reducing the Ethereum mining reward while the second change functions to delay the difficulty bomb (This is a mechanism that is responsible for forcefully upgrading Ethereum to an entirely different mode of operation, known as proof-of-stake).
On the other hand, Ethereum functions on a Proof-of-Work (PoW) consensus, similar to the blockchain-based platform Bitcoin. This shift from PoW to PoS is significant because the problem of PoW included making the blockchain of Ethereum quite challenging to alter, with the result being wastage of a tremendous amount of energy.
However, switching from PoW to PoS is no simple task because of two aspects, one being that the mining ecosystem has grown exponentially around the PoW consensus and the second being that the complete structure of the PoS consensus hasn’t been finalized yet.
Moreover, there's another problem inside the Ethereum mining ecosystem, and that is the "difficulty bomb." This problem substantially raises the complexity of the issues while mining, making it steadily challenging to mine Ethereum, encouraging the mentality of staking the coins to mine new blocks.
The EIP 1234 is designed to tackle this difficulty bomb. However, you will be able to see the proper implementation of this protocol in the Casper upgrade, which will be rolled out in early 2020.
However, regarding the EIP 1234, it will reduce the block mining rewards from 3 ETH/block to 2 ETH/block because the difficulty bomb mechanism had been already out for a long time, and people already devised workarounds to calculate the effects into miner profits.
PRICE FLUCTUATION AFTER THE UPGRADE
Predicting the price changes of Ethereum is quite difficult. However, the Constantinople, Istanbul and Casper upgrade is not predicted to cause any significant fluctuations in the Ethereum pricings because in the past two years, the dropping of Ethereum's price from $1,400 in January 2018 to $85 in December 2018, was before any significant upgrades were rolled out, so it is unlikely that the upcoming Ethereum upgrades will cause substantial price fluctuations.
As mentioned previously, the Istanbul upgrade is yet to roll out, and hence, it's features are challenging to describe. Still, one thing's for sure; the Istanbul upgrade is aimed to improve the performance efficiency significantly over Constantinople. The changes that will be in Istanbul will include some meta shifting, detailed in EIP 1679;
Layer 2 solutions will be based on SNARKs and STARKs, making them more performant in general.
Enable the interoperation of Ethereum and Zcash.
Allow contracts to introduce more creative functions.
The other EIP’s will be detailed after the Istanbul upgrade is rolled out.
Griffex is a marketplace for smart sale and purchase of cryptocurrencies, a flexible trading platform presenting an opportunity for seasoned investors, retail traders, and cryptocurrency enthusiasts at managing a multi-currency investment portfolio. Griffex adores the flexibility of trading with multiple cryptocurrencies, the sensational charm in new-age commerce and financing that has attracted millions towards this revolutionary mannerism of investing.