Countdown to Ethereum fork?

There have been a lot more voices about Ethereum fork recently. After all, the merger date is basically confirmed, and the ownership of more than 800T of computing power in the entire network is still in doubt. Even Bitmain was upgrading its own Ethereum mining machines a few days ago.

Yangyang Interview Weibo showed the speech of Guo Hongcai, an old generation Bitcoin player, about forking in the community. He seemed to have determined that Ethereum would fork, and his words revealed that this was a high probability event. Interestingly, Guo Hongcai has long been out of the market's sight, and this time he seems to be well prepared. I believe that he is not the only one, there must be others who try to take advantage of this rare opportunity to plan and call for miners to fork computing power.

The last time the entire network paid attention to a fork, it was the battle between BCH and BSV for computing power, but that was Bitcoin. If Ethereum really forks, it will not be about computing power, but about assets. As the world's largest application chain, the initiative of ETH has long been transferred to the asset side, and they are the decisive key.

This is an article from BlockBeats last December. The content discussed is not outdated and I hope it can help readers understand what is happening in the Ethereum community.

The following is the main text

Anyone who sees the term "Ethereum 2.0" will think that it is an upgraded version of Ethereum, which is indeed the original plan of Ethereum. Just like "Iron Man 2" must be a sequel to Iron Man. But perhaps, in the eyes of some people, Ethereum 2.0 is not as simple as a sequel.

“It’s actually another new project,” said T, a heavy Ethereum participant. “It’s not the same Ethereum as before.”

This view is inconsistent with current market sentiment.

The fifth to last week of 2020 will definitely be mentioned again and again in future reviews of the cryptocurrency field. During this week, Bitcoin, the largest cryptocurrency by market value, refreshed its historical high, and Ethereum, the second largest cryptocurrency by market value, officially started its next new stage - Ethereum 2.0 Phase 0.

"Ethereum 2.0 is going live pretty fast." This is the most consistent view about this upgrade. It is well known that Ethereum upgrades are not on time. Phase 0 was originally expected to be launched next year, but it was unexpectedly launched so soon.

The advance in time has brought a lot of confidence to the market sentiment. In Phase 0, a starting threshold of 524,000 ETH was set for pledge, and only when the requirements were met could the platform be launched. As the price of ETH rose, the value of at least 32 ETH pledged by each node was close to the value of one Bitcoin. The lock-up of hundreds of thousands of RMB did not affect the sentiment, and the starting threshold was completed without resistance. As of December 8, more than 1.2 million ETH had participated in the pledge.

Technology, price, sentiment, confidence, Ethereum 2.0 now looks perfect.

But the Ethereum community does not seem to be so optimistic.

Sharding Confusion

The most recognizable changes in the Ethereum 2.0 upgrade are two: one is the change in consensus, from PoW to PoS; the other is the introduction of sharding technology, with the aim of expanding network performance.

“When the introduction of sharding technology was first proposed, it was reasonable,” said Uncle Miao, product manager of Spark Mining Pool, “but now we need to rethink this issue.”

Among the current solutions for scalability in the Ethereum community, Rollup technology has the highest status. From founder Vitalik Buterin to the ecological application team, everyone has almost the same consensus, and even the project team has placed Rollup before Ethereum 2.0. "We are not paying attention to 2.0 now, what we value most is Rollup." dForce founder Yang Mindao told BlockBeats.

Compared with Rollup, the status of sharding has been reduced from data execution to data storage, which Vitalik also recognizes. In the Ethereum 2.0 core developer conference call in mid-November, the core developers discussed and believed that Ethereum 2.0 may temporarily shelve its second phase plan until the feasibility of the data sharding layer Rollup solution is falsified.

In other words, Rollup is now recognized as Ethereum’s most promising expansion tool. Everything is based on the development of Rollup. If Rollup doesn’t work, consider using sharding to execute data. The current function of sharding is only for data storage.

Figure 1: Ethereum 2.0 developer conference call transcript from mid-November 2021

"But if the shards are only used for data storage, then in order to solve the data availability problem, the research goals and feasible solutions should be redefined instead of directly using the shards originally used for execution expansion." Uncle Meow raised his own doubts.

The domestic Ethereum community has discussed this issue with Vitalik, but the conversation did not produce any results and the two sides failed to convince each other. After all, this is a project roadmap issue, which cannot be discussed in a few words, and this issue is too far away. Ethereum 2.0 has just entered Phase 0, and it is still several years away from Phase 2.

But now there is a problem that is closer and more difficult than sharding: if the consensus is changed, will Ethereum fork?

Figure 1: Vitalik expressed his views on forks in the community

The persistence of PoW

This is not a fork in the conventional sense.

“If the fork does happen, unlike The DAO, it is not caused by an accident, but by the roadmap.” Another question Uncle Miao raised is the changes in Ethereum 2.0 at the consensus level: when all technical improvements can be completed on the basis of PoW consensus, why use PoS?

Vitalik’s point of view is very clear, “Upgrading PoS is to improve security and efficiency.” He responded in the Ethereum community.

There was a heated discussion in the community about this topic a few days ago. Similarly, the two most mainstream consensuses used by the most projects must have some areas for competition with each other. Not everyone agrees with the conclusion that "PoS is definitely safer than PoW."

In Vitalik's plan for Ethereum 2.0, the Ethereum 1.0 chain (the current Ethereum PoW chain) and the Beacon chain will merge at some point. Currently, the specific merger is just a proposal. The idea is roughly: everyone votes for a block height first. After this height, Ethereum 1.0 will no longer continue to track the status and start tracking the status of 2.0.

“What he said has been very clear. In theory, as long as there are miners continuing, the Ethereum 1.0 chain will continue to run unaffected,” Uncle Meow explained.

In other words, according to this scenario, we will see two chains called "Ethereum" running at the same time, one using PoW and the other using PoS. This is not a conventional fork, but judging by the results, it is indeed a fork. "I think the possibility is quite high," said Yang Mindao.

The current one chain will become two chains in the future. The ETH that is transferred to Ethereum 2.0 at a 1:1 ratio will become two ETHs with different prices in the future. The current huge Ethereum community will be divided into two.

Conventional forks require computing power to make a choice, and the main players in the choice are miners. If two Ethereum chains really appear at the same time, the ones who need to make a choice this time are the entire Ethereum ecosystem, the project parties, the users, and the investors.

Choice of Ethereum Ecosystem

DeFi projects have already occupied half of the Ethereum ecosystem, but the foundation of DeFi projects is the assets on the chain. "The protocol parties mainly follow the asset parties." Yang Mindao explained his views on DeFi projects.

The so-called asset side refers to on-chain assets such as USDT and USDC. The DeFi mortgage lending ecosystem is basically based on the asset side. For example, if USDT is mortgaged to lend other currencies, there is no doubt that the DeFi protocol must follow the asset side. But from the perspective of the asset side, this seems to be a difficult problem.

Let’s take USDT, which currently has a market value of nearly 20 billion US dollars, as an example. It is impossible for the issuer Tether to directly announce that the issuance of USDT has doubled due to the emergence of another Ethereum chain. If Tether distributes more than 10 billion US dollars of ERC-20 USDT to two chains, it needs to consider the proportion of distribution. The asset side on the Ethereum chain is not only USDT. Most protocols support multiple assets. If USDT chooses Ethereum 1.0 and USDC chooses 2.0, it will be difficult for the protocol parties.

“Asset holders should choose the same chain together,” Yang Mindao said. In other words, the ecosystem needs to make a choice to choose a network that can continue to be called “Ethereum.”

If only one chain is chosen, maintaining the status quo seems to be the best solution. "The fork will not take away the popularity of Ethereum 1.0." Brother T said.

As a miner, investor, and founder of the DeFi project xDeFiLabs, Brother T does not see the advantages of Ethereum 2.0. In his opinion, the current pain points can be solved by Layer2 or Polkadot. If they can't solve them, then Ethereum 2.0 can't solve them either. "I can't find a reason why people will leave Ethereum 1.0," he said. "I even invested in an Ethereum ASIC mining machine project."

Unlike Bitcoin mining machines, current Ethereum mining machines use GPUs for mining. The better the performance of the graphics card, the higher the mining efficiency. The concept of ASIC chips has never really appeared in the Ethereum ecosystem.

However, at the same time as Ethereum 2.0 was launched, Ethereum ASIC chip mining machines were also being developed intensively. "Bitmain, Linzhi, and Xindong are all developing Ethereum ASIC mining machines." An insider told BlockBeats, "The process is mainly 14nm or 16nm."

Miners are profit-driven, and mining machine manufacturers will only develop ASIC chips because they can ensure that miners can make profits. Ethereum still has two or three years of PoW period before it switches to PoS. It is enough for miners to use ASIC mining to make profits during this period. But think about it from another perspective. If the mining machine manufacturer has determined that the life of a mining machine is only two or three years, then why should it spend effort to develop a brand new concept?

"If there is a fork, I will definitely support Ethereum 1.0." Brother T's view represents the vast majority of Ethereum miners. "Currently, no miner has asked us to provide PoS services." Uncle Miao said, "Ethereum PoW miners and PoS nodes seem to have little overlap at present."

So who is supporting Ethereum’s PoS?

The new force of PoS

Like many people, Ethereum enthusiast Li Zelin believes that Ethereum 2.0 is an iteration of the current version. If Ethereum’s performance is to be improved, it must switch to a PoS-based system. “Even if there is uncertainty, PoS is still a necessary step.”

In his opinion, although there are many Layer 2 solutions on the market, these solutions are more like system "plug-ins". "No matter how powerful the plug-in functions are, they cannot represent the strength of the underlying infrastructure itself."

In November this year, the launch of Ethereum 2.0 became the focus of community attention. Li Zelin, who had hundreds of ETH in his hands, considered that since he had decided to hold Ethereum for a long time, he might as well participate in the ecosystem and do something. In addition, he already had the technical foundation, so it should not be a problem for him to build his own node and become a validator to participate in the staking system.

The preparations went smoothly, and he even set up an Ethereum PoS WeChat group to exchange ideas. At 20:00 on December 1, the Ethereum 2.0 network genesis block was officially launched. After 5 minutes and 23 seconds, Li Zelin's node successfully mined its first slot. He was so excited that he even posted a screenshot on his Moments.

Many netizens on Twitter posted that they have become validators

Li Zelin is lucky. On the second day of the launch of Ethereum 2.0, more than 600 nodes in the entire network were punished for various problems. This is also a point that Ethereum 2.0 is criticized for. Nodes must be online 24 hours a day, and they will be punished for any reason. This also led to the rise of node service providers. Due to the limited personal ability, 24-hour online and professional node service providers have become the most active group in the Ethereum 2.0 network.

But Li Zelin believes that this is not a reason to disapprove of PoS. According to his experience, choosing a node in Hong Kong, China, rather than a machine in the mainland, can reduce the probability of block synchronization delays, and setting up backup machines are ways to avoid accidents.

“Miners are very likely to initiate a fork.” As a PoS supporter, Li Zelin also acknowledges the possibility of a fork, but obviously, he is betting on the PoS chain, “Users will choose Ethereum’s new chain.”

His tone was as firm as that of Ethereum 1.0 supporters betting on the PoW chain.

Of course, the possible fork is still far away from now. The PoS consensus needs to go through many tests, including proposals, discussions, concept verification, client implementation, attack scenario verification, etc. before it can be truly used. There is even a possibility that everyone finds that PoS does not work in Ethereum, and Ethereum 1.0+Layer2 is recognized by the entire community. After several years, the consensus is restored, and everything about PoS is a trial and error.

“Ethereum is still the strongest public chain, not because of its first-mover advantage in technology, but because of its first-mover advantage in consensus and market confidence. After so many years, people in the entire community can embrace the possibility of Ethereum failing in its exploration of new directions,” said Uncle Meow.

From the DAO incident, the Parity wallet incident, to the current DeFi hacking incident, Ethereum users have accepted the possibility of Ethereum taking risks. Similarly, Ethereum 2.0 is also an adventure. This is a big adventure involving an ecosystem worth hundreds of billions of dollars, tens of thousands of users and developers, and the strongest public chain in the blockchain.