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Blockchain and finance in 2019
Ethereum Hard Fork Constantinople explained: How will you be affected?
After a six-week delay, Ethereum’s hard fork Constantinople is finally expected to be rolled out sometime on February 27 (give or take 1–2 days) at block number 7,280,000. While Ethereum has already experienced a hard fork (search Ethereum Classic for details), Constantinople is about to bring some important changes to the inner workings of the currency — changes that could affect you. So, how did we get here? What is Constantinople all about and what can you expect after implementation?
What lead to Constantinople
Ethereum is in a constant state of development and growth. Currently in the planned phase of development dubbed “Metropolis”, Ethereum is partly taking advantage of the upcoming fork to make structural changes that optimize performance and reduce costs, contributing to Ethereum’s overall health in the long run. With everyone in agreement over the update, no new currencies are expected to arise as a result of Constantinople.
The big story for Constantinople, however, is Ethereum’s progress in its shift from proof-of-work (POW) mining to proof-of-stake (POS). To make the transition as smooth as possible, a difficulty bomb was introduced to Ethereum in September 2015 to gradually make POW mining more difficult until it becomes entirely implausible, forcing everyone to convert to POS. But the Casper Protocol (Ethereum’s POS protocol) isn’t completed. Hard fork Constantinople is being implemented in large part to delay the difficulty bomb by 12 months and smooth out the resulting Ether supply kinks in the meantime. More on this later.
What’s in Constantinople?
Constantinople includes 5 Ethereum Improvement Proposals (EIPs):
- EIP 145 — Bitwise Shifting: Introduced by Alex Beregszaszi and Pawel Bylica, both Ethereum developers, this EIP brings bitwise shifting to Ethereum, running bytecode for about 1/10 the cost currently required in GAS, Ethereum’s internal pricing for transactions and running contracts. Reducing these costs makes it cheaper to use Ethereum’s smart contracts in the long run — a plus for businesses and developers.
- EIP 1052 — Large-scale Code Optimization: Developed by Nick Johnson and Bylica, this EIP helps specify a new opcode, EXTCODEHASH, which essentially makes it possible to check only essential smart contract bytecode instead of combing through the entire thing. This is another bonus for developers and businesses alike.
- EIP 1283 — Net Gas Metering: Also authored by Nick Johnson, this EIP is yet another way of reducing GAS usage and prices, this time by introducing a unique method of “GAS metering” for the SSTORE opcode. (EIP 1283 won’t actually come into effect with Constantinople. More on that below.)
- EIP 1014 — State Channels: Vitalik Buterin wrote this one himself, providing the potential for Ethereum interactions between addresses that don’t actually exist on the blockchain. This is meant to improve performance and allow Ethereum to branch out in its potential use cases.
- EIP 1234 — The Thirdening: Since postponing the difficulty bomb will have the effect of making Ethereum far easier to mine with the implementation of Constantinople, developers need a different way to regulate the amount of Ether in circulation and reduce inflation. Their answer is to reduce the reward for mining Ethereum by 1/3 (from 3 Ether to 2). Though considered by many experts to be the most responsible way forward, more than a few miners are unhappy with this change.
Why the delay in Constantinople?
Ethereum’s latest hard fork was originally scheduled to take place in mid-January, but a delay was announced about one day before release. The culprit was a critical security vulnerability in EIP 1283 that would have made contracts susceptible to so-called “reentrancy attacks”.
The vulnerability was discovered by smart contract audit firm ChainSecurity in analyzing Ethereum’s new EIPs. As a result, Constantinople will now be released around February 27 in two parts simultaneously, the first including EIP 1283 and the second, called St. Petersburg, removing it. No additional security concerns have arisen in the meantime.
What it all means for you
Are you a developer or do you run smart contracts on Ethereum? Then Constantinople is an update worth celebrating. The included EIPs will make things cheaper and more efficient, though you probably won’t notice any immediate difference. Things seem to be looking up for Ether holders, with values on the rise and the market overall swinging back towards a bullish state. Constantinople is expected to increase long-term confidence in Ethereum and its eventual shift to POS mining.
Current Ethereum miners, however, are due to see a decrease in profits from their operations — approximately a 33% decrease. While specific numbers are impossible to predict and will almost certainly fluctuate from time to time, this decrease is likely to have an immediate effect on the market. With daily block creation hovering at about 5,900 over the last 6 months, miners have been generating approximately 17,700 ETH. After Constantinople, however, this figure is expected to drop to around 11,800 — a reduction of 5,900 ETH every day. At the same time, investing in more resources to mine at a higher rate and make up for losses is likely to backfire as the difficulty bomb is expected to return in another year and the march toward POS continues.