Ethereum’s hard fork Constantinople: all you need to know
As if cryptocurrencies weren’t complicated enough for new investors, now Ethereum has a hard fork coming up on January 16.
A fork is essentially an update or change to a cryptocurrency blockchain protocol. There are two main types: a soft fork and a hard fork. Soft forks are backward-compatible, meaning that nodes on a network can still recognize newly coded blocks implemented by the soft fork.
A hard fork, on the other hand, isn’t backward-compatible. Newly created blocks cannot be recognized by the network’s nodes, which means that at times a new network needs to be created to cater to new blocks using an updated protocol. A prime example of a hard fork is the creation of Bitcoin Cash in the wake of the bitcoin hard fork in 2017.
So will Constantinople introduce a new cryptocurrency?
The Constantinople hard fork differs from bitcoin’s in that it is non-contentious, meaning it is being embraced by a majority of the Ethereum community. Bitcoin’s hard fork in 2017 was contentious, meaning there were major disagreements in the cryptocurrency’s community. For instance, many believed bitcoin’s network was no longer sustainable, and therefore a new network was needed, causing the development of Bitcoin Cash.
The Constantinople hard fork is expected to take place on January 16 at a block height of 7,080,000, and most in the community seem prepared for the change. Major exchanges and trading platforms have expressed their support for the fork, and have prepared all the technical requirements needed to adapt to the update. The main goal of Constantinople is to ease the future transition of Ethereum from the Proof-of-Work (PoW) mechanism to Proof-of-Stake (PoS), while cutting costs and increasing efficiency of the network.
Constantinople’s market effect
The arrival of Constantinople has had a positive effect on Ethereum (ETH) value. In mid-December, ETH was trading around $80, an all-time low for the cryptocurrency. With Constantinople’s approach, that value nearly doubled in less than a month, reaching $160 on January 4 and reclaiming the number two spot in value rankings, as shown by CoinMarketCap.
As of this writing, however, its value has dropped to about $118, returning to the third rank in value, as Ripple has reclaimed the number two spot again. The drop isn’t associated with Constantinople but with the drop of the cryptocurrency market as a whole. Ethereum isn’t far behind and will most likely reclaim the number two spot as we get closer to Constantinople.
5 Ethereum Improvement Proposals
Constantinople will bring about five major changes to the Ethereum network, through Ethereum Improvement Proposals (EIPs). Most of the EIPs cut costs and increase efficiency, while EIP 1234 will most heavily affect current miners of Ethereum.
Possibly the most important aspect of the update, EIP 1234, is intended to mitigate the upcoming change from Proof-of-Work (PoW) to Proof-of-Stake (PoS), by reducing the mining reward from 3 ETH per block to 2 ETH over a 12-month timeframe. It will also delay the “difficulty bomb” which basically increases the difficulty of mining, making it less profitable in the process.
EIP 145 introduces bitwise shifting to the Ethereum network, a change intended to run smart contracts in a cheaper and more efficient manner, by reducing gas consumption.
A new operation that allows smart contracts to verify the code of another smart contract more efficiently, EIP 1052 utilizes hash verification to speed up interaction speeds between smart contracts.
EIP 1283 makes it possible for multiple updates to use the same storage slot within a transaction. In layman’s terms, EIP 1283 is intended to lower transaction cost.
EIP 1014 adds state channels to the network. Similar to bitcoin’s Lightning network, it allows for transactions to be settled away from the blockchain, thereby improving the number of transactions per second.
Ethereum in 2019
In order to remain on the Ethereum network, the Constantinople update will need to be applied to any current Ethereum software users. If it were a soft fork, this would not be the case, due to backward compatibility.
This update is just a stepping stone for Ethereum to expand the network while increasing efficiency. This update marks the beginning phases of the network’s transformation from a PoW system to PoS. Although Ethereum’s value isn’t what it used to be, many experts are predicting a strong rise for the cryptocurrency in 2019.
Compared to other cryptocurrencies, Ethereum has multiple uses, and is expected to be adopted by more companies using decentralized cloud-based applications in 2019. The increase will be slow, but many estimate Ethereum’s value will hover around $500 toward the end of 2019, only to increase further come 2020. Constantinople is just one of the many steps being taken by the Ethereum development team to ensure its longevity.