Peaceful upgrade or split? Ethereum plays a good hand badly

Author: Yin Yaoping

Regarding the recent Ethereum "Constantinople" hard fork that has been all over the news, Xiaocong has done in-depth analysis and popular science interpretation more than once.

Software upgrades like Constantinople occur almost every day in the current Internet field, but unlike the centralized Internet, in a decentralized blockchain network, upgrades must be unanimously approved by users, otherwise disagreements may arise and cause community divisions.

Because of this, there are two possible outcomes of a blockchain hard fork: 1) a consensus-based hard fork for all members to upgrade and 2) a community-splitting hard fork where no consensus is reached.

Since the time of the Constantinople hard fork was determined (around January 16), the Ethereum developer community has always presented a harmonious image.

• Vitalik admitted on Twitter that the Constantinople hard fork was a normal technical upgrade agreed upon by all members, not a fork;

• Afri Schoedon, product manager of Ethereum Parity client, publicly stated that the risk of Ethereum community splitting this time is low because most of Ethereum mining pools support the upgrade;

• Peter Pratscher, CEO of Ethermine, the largest Ethereum mining pool, also told CoinDesk, “We expect that most of the unupdated nodes will be updated before the fork.”

However, when it comes to upgrading large-scale blockchain projects, has there ever been a smooth sailing?

Just when everyone was about to believe that Ethereum would complete the Constantinople upgrade peacefully as planned, they kept finding that things were getting more and more confusing as they got closer .

Discussions, disputes and even divisions about the upgrade have been heard from the Ethereum community. Then on January 15, the official Ethereum blog posted that the Constantinople hard fork was postponed due to a major security vulnerability found in Ethereum Improvement Proposal (EIP) 1283, and the new hard fork date will be selected during the next core developer conference call on Friday (January 18).

This is the second time that the Constantinople upgrade has been postponed after problems with the Ropsten test network in October last year. In the early morning of January 16, the price of ETH also plunged, falling by more than 6% in 15 minutes.

The Constantinople upgrade, which has been in the market for months, has attracted too much attention. Will the delay on the eve of this upgrade be the last one? What are the uneasy factors behind the Constantinople upgrade? What impact will these surging "undercurrents" have on the Ethereum upgrade and its subsequent ecological development? This article will try to analyze it.

The fork is imminent, and whether to switch the mining algorithm is still undecided

The dispute over the Constantinople upgrade started with a few articles on Medium.

On January 4, Ikmyeong Na from the Ethereum and ProgPoW developer community published an article on Medium, suggesting that the Ethereum Foundation adopt the ProgPoW algorithm (an ASIC-resistant algorithm) in the Constantinople hard fork . He also put forward four reasons:

• To prevent the Ethereum network from being hacked by ASICs (specialized mining machines), anti-ASIC algorithms need to be used as soon as possible. ASICs make the network vulnerable by allowing a small number of miners to review transactions and manipulate the ledger by performing a 51% attack;

• ProgPoW is fully prepared to replace the current Ethash algorithm and prevent centralization caused by ASICs;

• If we miss the current time, we may never be able to switch to ProgPoW, because ordinary hardware (GPU) may soon no longer be the main computing power of the Ethereum network. In the end, ASIC miners will dominate the mining of Ethereum.

• It is necessary to prevent the current GPU miners and mining industry on Ethereum from going bankrupt, causing the Ethereum community to lose its solid foundation.

On January 12, Ikmyeong Na made another direct statement: Ethereum will be split in order to implement ProgPoW .

Ikmyeong Na is the developer of ProgPoW and an avid fan of GPU mining. In the article, he reiterated that the centralization problem of proof of work (PoW) is already very serious, and ASIC will create opportunities for manipulating the network, making it unstable and unsafe (Ethereum Classic is a typical victim of the Ethash ASIC mining accident).

According to Ikmyeong, after he proposed that the Constantinople hard fork adopt the ProgPoW algorithm, he received personal insults and harassment from one of the core developers of the Ethereum Foundation. Therefore, he decided to build a forked node to implement an Ethereum that can only be mined with GPUs to meet the needs of himself and other miners, and called it Ethereum ProgPoW.

Ethereum’s emergency plan “ProgPoW” caused trouble

Why did ProgPoW appear in the middle of the transition from PoW to PoS algorithm, causing panic among the people?

The ProgPoW algorithm is a variant of PoW, specifically designed to weaken the advantages of ASIC miners. Its main goal is to narrow the gap between ASIC mining and GPU mining.

First of all, we need to know that there are two differences between ASIC and GPU mining machines when it comes to mining.

• First, there is a difference in the ease of mining. ASICs are unaffordable for most people, and for mass miners, it is easier to use GPUs for mining. However, from the perspective of "decentralization", of course, the wider the scope of mining, the better.

• Secondly, there are differences in mining energy consumption and efficiency between the two. The energy efficiency and computing power of ASIC mining machines are much higher than those of GPU mining machines. GPU miners are at a clear disadvantage in the competition, and the use of ASIC also makes it easier for a small number of miners to master large-scale computing power.

For a long time, major cryptocurrency communities (such as Bitcoin and Ethereum) have had concerns and disputes about the centralization of mining caused by ASIC mining machines, and anti-ASIC has long been a firm consensus among some people. Monero (XMR), Cloud Storage Coin (SC), etc. have also modified their algorithms to resist ASIC mining machines.

Therefore, ProgPoW can be regarded as an emergency plan for Ethereum . ProgPoW was first proposed as an EIP in May 2017. The Ethereum development team did not want to see miners have centralized power, nor did they want the community to split, so they created a ProgPoW development team to respond in time before the network fell into centralization.

Recently, there was a discussion at the Ethereum Development Conference on whether to introduce an ASIC-resistant mining algorithm. However, so far, the Constantinople hard fork upgrade does not include the ProgPoW mechanism.

This obviously made the developers and staunch supporters of ProgPoW unable to hold back. Ethereum is the largest GPU mining currency in the cryptocurrency world, and the number of GPU miners is huge. Faced with professional mining equipment ASICs that have better performance and efficiency than GPUs, they naturally panic.

In particular, the Constantinople upgrade will implement the EIP-1234 proposal to reduce miner rewards, which will increase the chances of GPU miners exiting the network because GPU miners have low profitability compared to mining with professional hardware ASICs. Therefore, Ikmyeong Na and others began to defend their dominant position in the Ethereum network in their own way.

On the other hand, ASIC mining machine manufacturers are very worried that Ethereum will really introduce the ProgPoW mechanism.

A week ago, a Shenzhen mining machine manufacturer named Linzhi Technology issued an open letter calling on Ethereum developers to publish the rules of the ProgPoW algorithm for qualified ASIC manufacturers, and wrote: "It is designed to obtain higher efficiency and better performance. We will not attack what we believe in."... "Call on Ethereum developers to publish the rules and requirements of the ProgPoW algorithm for qualified ASIC manufacturers... to reach a consensus on this before the ProgPoW algorithm is activated."

This is a market competition game, and the rules can be changed at will, which makes ASIC mining machine manufacturers live in fear.

• Dovey Wan, former managing director of Danhua Capital and founder of Primitive, tweeted, "Ethereum is the one who has complete control over the system. They are not worried about ASIC centralization, but about losing complete control."

• Martin Koppelmann, CEO and co-founder of Gnosis, said that in order to protect decentralization, the step of implementing PoS is more constructive than the controversial exclusion of ASIC miners. He believes that the implementation of the ProgPow algorithm will make people no longer focus on the final destination of the POS algorithm.

• In addition, on January 12, the mining pool Bitfly also launched a survey on Twitter on this hot topic, soliciting netizens' opinions on Ethereum's switch to PoW algorithm. As of today, a total of 2,357 netizens have participated, of which 45% want to switch to ProgPoW, 34% want to switch to other ASIC-resistant PoW algorithms, 3% support switching to ASIC-friendly PoW algorithms, and 18% believe that the current Ethash algorithm should be retained. It can be seen that there are still a considerable number of netizens who support switching to the ASIC-resistant ProgPoW algorithm.

What will Ethereum use for mining next? No conclusion yet

Whether the Constantinople upgrade will eventually introduce the ProgPoW algorithm, the current answer is: there is no conclusion yet.

Lane Rettig, a core technical member of Ethereum and a founding member of the Ewasm team, said in an interview with Golden Finance on the evening of January 12:

The issue of ProgPoW mechanism is being discussed closely internally. The real discussion actually just started this week. No formal decision has been made yet. Anything can happen . He believes that ASICs bring future rewards to the present, which is a risky game. The point is not to resist ASICs all the time, but to let Ethereum transition to Serenity and PoS.

No matter how the Ethereum community ultimately decides, it has already thrown up too much controversy and uncertainty.

Some media (Shenlian Finance) even speculated that the split of Ethereum might be a conspiracy of Nvidia, because the design of ProgPoW is obviously beneficial to traditional graphics card manufacturers such as Nvidia; ASIC mining machine manufacturer Linzhi Technology also bluntly stated in its open letter: It is shocked that Ethereum developers would consider cooperating with a hardware company.

Ethereum seems to be facing a dilemma. On the one hand, the transition to POS hopes to continuously reduce mining energy consumption, improve mining efficiency, and eventually transition to a PoS stage without miners; on the other hand, hardware such as ASIC, which is specifically designed to greatly improve mining efficiency, has the risk of causing centralization and triggering governance difficulties.

You talk to me about faith, but I have to talk to you about money

From a technical perspective, the "Constantinople" upgrade aims to improve Ethereum's performance, reduce development costs, enhance practicality, pave the way for the transition to PoS, and move towards the established goal of becoming the "world computer."

Although most developers have reached a consensus on the content of the Constantinople hard fork, the situation is different for the massive miners who drive the development of the Ethereum ecosystem.

The significance of Ethereum upgrade to the development of blockchain technology is too far-reaching for miners to grasp . All upgrade contents, including gas fee reduction, state channel optimization, TPS optimization, etc., will not benefit miners if they cannot bring positive feedback at the market level in the end.

However, the production reduction proposal of EIP-1234 will make them anxious. The reduction in mining rewards will directly affect the mining profits of miners, and miners who rely on mining for their livelihood will inevitably be affected.

Although from the basic law of supply and demand, as block rewards decrease, the amount of ETH flowing into the market will decrease accordingly, the price of ETH may rise, and the inflation rate will gradually decrease, stimulating the increase in the value of ETH, but this is ultimately speculation and estimation.

To sum it up in one sentence, the technological advances in this upgrade will not directly benefit miners, but the reduction in ETH production will directly affect miners' mining income; the long-term value increase of ETH that may be brought about by the upgrade is yet to be determined, but the current increase in mining costs is certain .

Reducing block rewards will directly affect mining profits. Miners who make a living from mining will directly feel the reduction in income. How can there be no disputes or disagreements?

• Chen Lei, secretary general of Peking University Blockchain Club and owner of a mining farm, is worried that after the reduction in Ethereum production, machines with high electricity costs and low operation and maintenance efficiency will be phased out, just as was the case during the crash in November last year, which may affect the overall market by 20-30%.

• The CEO of BTC.com also said that as block rewards decrease, miners may switch their computing power from Ethereum to other currencies;

• After observation, Qiu Xiaodong, key account manager of Xinghuo Mining Pool, analyzed that based on the computing power of Ethereum's general-purpose mining machines, about 760,000 graphics card mining machines will leave the Ethereum network.

The hard fork upgrade plan was announced as early as August last year, and early miners did not make much noise. After all, the transition from PoW to PoS is a well-known technical mission of Ethereum. If the upgrade is not carried out as planned, the value of ETH may even be at risk of returning to zero.

But as the fork approaches, miners, as the direct beneficiaries of the upgrade, are increasingly unable to hold back. In addition, with the rise of ASIC mining machines, ordinary GPU miners will lose their competitive advantage, and the mining business will be transferred to the hands of "big players", and the survival of "retail investors" is worrying.

According to Ikmyeong Na, if ProgPOW and EIP-1234 (a proposal to reduce block rewards) are not bundled together, it will be a disaster for GPU miners, and he expects that more than 30% of Ethereum miners will go bankrupt .

Ethereum development studio ConsenSys published a blog post stating that the main driving force behind miners' behavior is electricity prices and the price of ETH. If the reduction in ETH inflation has a positive impact on the market, miners will return to the Ethereum network.

It is clear that everyone realizes that the volatility of miners' earnings is the only reason they stay or leave.

• As for miners , most of them only care about their mining costs today and tomorrow, whether their profits will change, mining yields and ETH market prices. Just like most cryptocurrency investors, no one cares whether the Ethereum network will be stable and secure after the fork, and whether the community consensus will be affected.

• But for the Ethereum community , Constantinople is a long-determined upgrade and an important milestone in technological development. Whether to introduce an ASIC-resistant algorithm also requires consideration of the interests of multiple parties. A more cruel foresight is that Ethereum is ultimately moving towards the ultimate goal of eliminating mining machines, computing power, and miners.

Of course, it doesn’t matter if the interested parties cannot coordinate. After all, forking is the ultimate freedom given by blockchain.

Whether the fork is successful or the split ends, Ethereum cannot escape the "disaster"

Blockchain upgrades are inherently risky events that are different from Internet upgrades. The risks that the Constantinople upgrade may bring to the Ethereum network exist both before and after the upgrade, whether the fork is successful or ends in a split.

According to the official announcement of the Ethereum community, this upgrade requires cooperation among major node suppliers, exchanges and wallet service providers to upgrade their respective running nodes to the latest version. This is a task that requires concerted efforts from all parties.

If everyone agrees to upgrade, it will be a normal upgrade hard fork.

If the Constantinople hard fork is successfully implemented, Ethereum will be upgraded to a new mainnet and implement new network rules. With the sudden reduction of blockchain rewards, machines with low returns and low operation and maintenance efficiency will be forced to withdraw from mining;

If this upgrade and ETH production reduction cannot bring positive signals to the ETH market in the short term, more miners will withdraw from the main network, especially GPU miners who are at a competitive disadvantage. Compared with ASIC miners, their mining energy consumption is higher and their profitability is weaker. The withdrawal of a large number of miners will damage the stability of the Ethereum network.

If the conflict of interest over the Constantinople hard fork continues to escalate, the upgrade could take two paths: further postponement or split.

1) Postponement and further postponement

Although it is currently in a postponed state, if the widest possible consensus cannot be reached, Constantinople will most likely be postponed. Because if a hard fork is carried out when the software of a large number of mining pools and miners cannot be upgraded in time, the computing power of the main network after the fork will drop sharply, affecting the security of the entire Ethereum main chain.

As early as October last year, Ethereum postponed the Constantinople hard fork to January this year due to a program error.

Afterwards, under various public pressures, the price of Ethereum fell by 94%, and its second largest market value ranking was replaced by Ripple. Later, with a wave of recovery in the cryptocurrency market, it regained its position as the world's second largest cryptocurrency. This Constantinople hard upgrade has long been regarded by the market as a valuable supply for Ethereum to continue to recover.

On January 15, just one day before the hard fork, Ethereum announced a postponement due to the discovery of a security vulnerability, but it is still unclear how long the postponement will last.

This has caused a lot of unrest on Reddit. On the one hand, netizens believe that the postponement is necessary, but on the other hand, they also said, "It's delayed again, very sad", "This problem should have been detected during the last postponement", "Very disappointed, it's really hard to keep faith now, this feeling is darker than the original DAO fork"...

The market’s wait is limited. If the Constantinople upgrade is repeatedly difficult to deliver for various reasons, the majority of followers will doubt the capabilities of the Ethereum developer community and the possibility of putting long-term plans into practice, which is likely to lead to a collapse in investment beliefs and pessimistic selling.

2) Conflicts among miners escalated, and the planned peaceful fork turned into a split .

If developers and miners represented by Ikmyeong Na insist on splitting, then Ethereum may follow the old path of BTC fork and BCH, with the two sides going their separate ways, with some miners remaining on the ETH chain and some switching to their newly built chain.

Perhaps, new coins will be generated after the split, or users will receive unexpected airdrops. Regardless of whether the split force is large or small, it will have a negative impact on Ethereum's main network security and governance reputation. Of course, forking a chain requires a lot of computing power and financial support. At present, no "unusual movement" has been seen from larger mining pools and institutions.

From the above analysis, it can be seen that after two postponements, whether the Constantinople upgrade will be a peaceful upgrade as Vitalik Buterin initially said, or it will be caught in a continuous dispute or even split, Ethereum will inevitably be "disaster", and the price of ETH may fluctuate at any time. This upgrade is a test of the technical capabilities of the Ethereum development team and even more so a test of the governance capabilities of the Ethereum community. Xiaocong also reminds the majority of ETH investors to pay close attention to the progress of this hard fork.

According to Xiaocong, on the evening of January 15, nearly 50% of full nodes had been updated to support the Constantinople upgrade. Since the upgrade was later postponed, 85.8% of full nodes in the entire network are currently in a state where they have not yet been updated to support the Constantinople hard fork.

Cut-off time: January 17, 10:00

Cut-off time: January 15, 22:00

He who wears the crown must bear its weight: How Ethereum can support "serenity"?

Blockchain upgrades are far more complicated than traditional Internet software upgrades, and Ethereum upgrades are far more difficult than upgrades of other blockchain projects.

As the earliest smart contract platform, Ethereum was once worshipped by various blockchain projects. The Ethereum network, which was the first to start and achieve success, carries too many users, applications and developers, and a single move affects the entire network; the development plan to transition from PoW to PoS, which was set at the beginning of the project, has become increasingly difficult as the number of its users increases.

Because every minor adjustment will affect the interests of all parties, and if the interests are not well coordinated, it is easy to cause disputes and divisions. The transition from the entire metropolitan stage to the tranquil stage has already shown too many twists and turns, with multiple postponements, delays, and security issues.

Constantinople is just a small step for Ethereum to enter the PoS stage. The real big change has not yet come. The current PoW mechanism relies on the support of miners, while the PoS stage will abandon the mining mechanism and disband the Ethereum miners. Can Ethereum complete the transition to PoS by simply detonating a difficulty bomb and making miners retreat?

If the night is too long, even the brightest moonlight will dim .

Hopefully, what ends up entering the Serenity phase isn’t a fragmented Ethereum.