Ethereum block difficulty growth started in November 2016. Since then, developers have been forced to make a hard fork to keep the network up and running until transitioning to a proof-of-stake (PoS) algorithm.
In the preliminary preparations for the Istanbul upgrade implemented on December 8, 2019, the Ethereum team once again decided to postpone the explosion of the so-called "difficulty bomb". Some people think that the "difficulty bomb" may lead to the outbreak of the Ice Age. How will this happen if the Ethereum network freezes? What are the consequences?
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Difficulty Bomb and Ice Age
When creating Ethereum (ETH), developers initially thought it could work on a Proof-of-Stake (PoS) consensus algorithm. However, since it takes more time to implement this idea, the network chose a more familiar consensus model (Proof of Work PoW) to launch.
At the same time, developers have deliberately introduced a difficulty bomb to Ethereum, a mechanism that gradually makes the process of generating new blocks more complicated, which will make the network gradually move towards PoS.
Initially, the difficulty bomb should have exploded after Ethereum was ready to use a new algorithm called Casper and triggered the so-called "Ice Age", a transition that makes mining new coins difficult and unprofitable stage. In theory, this procedure should force miners to switch to the new chain instead of maintaining the old chain.
However, due to the delay in the development of the PoS mechanism, the transition to Ethereum 2.0 has been delayed. At the same time, the difficulty bomb has exploded several times, and the Ethereum team has been conducting a hard fork to continuously delay the explosion of this bomb, so as not to scare the stability of the miner to exit the support network in advance.
What are the dangers of the Ice Age?
Vitalik Buterin, one of the co-founders of Ethereum, had previously predicted that the collapse of the Ethereum network would occur in 2021 because the Ethereum network would be almost frozen due to the difficulty bomb attack. However, although the development speed of the Ethereum project is faster than expected, the process of the PoS network transition has not been completed on time.
In April 2019, the difficulty of the Ethereum network began to increase again, and the current computing power is about 2498 terahash per second (1 TH / s equals 1 billion hashes per second). And, if the growth trend remains the same, the ice age may occur much faster than a given date. This could lead to miners' evacuation, reduced scalability, and even network crashes.
The Constantinople hard fork, which was delayed until January 2019, resulted in a reduction in the number of Ethereum mined daily, and Ethereum supply fell by 35% in just two months. Mining has become more difficult, and as a result, the daily circulation of cryptocurrencies has dropped from 20,000 ETH in January to 13,000 ETH in March. It now includes approximately 11,872 ETH daily and continues to decline further.
The current situation has attracted the attention of miners. Also, if ETH developers and network participants fail to find a compromise, the next few months could be crucial for the mining industry.
According to global trading company Susquehanna, since November 2018, the profit on ETH mining using GPUs has reached zero. In less than a year and a half, the average monthly ETH production profit per GPU has fallen from $ 150 to zero.
The market is not only affected by the increasing block difficulty and competition of the mining equipment industry, but also by the advantages of Bitmain and its new ant ASIC mining machine. Another decisive factor is the price of this second largest cryptocurrency, which is about 10 times lower than the December 2017 level ($ 1,401).
The activation of the difficulty bomb may make mining more unprofitable, which may cause miners to leave the network, while a single mining pool dominates the market. Even the withdrawal of some miners could endanger the security of the Ethereum blockchain and increase the probability of a 51% attack-similar to what happens on the Ethereum classic network.
Meanwhile, many miners are betting on another potential update called ProgPoW. This upgrade involves replacing ASIC miners with more traditional equipment such as GPUs. However, there are no plans to implement it in the Constantinople update.
It is worth noting that although miners have voluntarily refused to support the network, there will still be those who will ensure the operation of the network-but with the full-scale outbreak of the Ice Age, mining will become impossible at all.
However, some experts believe that the difficulty bomb mechanism is a necessary procedure to ensure the transition to PoS, and it should not scare miners. For example, Vlad Miller, CEO of blockchain platform Ethereum Express, told Cointelegraph that many miners can continue to operate:
"The transition from Ethereum to PoS is not only inevitable, but also an indispensable step in Ethereum development."
Miller went on to add that despite the fact that mining will now become less attractive, this change will be worth it in the long run as it will reduce electricity costs and reduce the likelihood of a 51% attack. He went on to add:
"Whether it's the Ice Age or Ethereum 2.0, it doesn't mean the end of miners. Many of them will turn to mining other coins, such as Zcash or Ethereum Classic (EC). Those who mine ETH will not be in the near future What to worry about. However, it is important to ensure that the mining equipment can be repaid before the transition to PoS. "
Scalability and network crashes
At the same time, an increase in block time will cause the Ethereum network's ability to process data to decrease. However, the current limit is set precisely based on the block time and can be changed if necessary. The only negative impact may be increased confirmation time for transactions. Although it takes an average of 10 minutes to release a block in the Bitcoin (BTC) network, one minute may be a viable method for Ethereum, especially if this is a temporary measure.
If the hard fork is delayed again, it may have a negative impact on the network bandwidth and increase the cost, because the complexity may increase to the production of one block, which takes about two minutes. At present, the average production time of the Ethereum block is about 15 seconds, and the fee is stable at 0.5 cents.
The exponential increase in the difficulty of ETH mining will cause the generation time of new coins to increase to an unacceptable value. Therefore, the speed of generating blocks will slow down, and the transaction confirmation time will increase, which will make the network very slow and even force it to stop running.
Decentralized projects will decrease
Due to a possible consequence of the Ice Age, the decline in the scalability of the Ethereum network can be sad for decentralized applications (DApps). Today, Ethereum has become a safe haven for many DApps-from various blockchain games and projects with their own tokens, to increasingly popular decentralized financial solutions.
However, as the number of DApps increases, the Ethereum network will begin to encounter more and more transaction throughput issues. Back in August, Buterin said that the Ethereum blockchain was almost full, which caused concern. Eric Conner, a product manager at Gnosis, a company that develops predictive market applications, told Cointelegraph that although not so critical, DApps may feel the impact of the difficulty bomb.
"For DApps, there is actually no direct impact, but because there are fewer data blocks per day, the transaction costs on the network will slowly rise, which means that the cost of using DApps will be higher over time. , "Conner claims.
In this case, it is unclear whether Ethereum developers can find a compromise. The possible consequences of the Istanbul hard fork complicate the solution. Some decentralized projects, such as Aragon and Cyber Network, worry that the update will destroy their smart contracts and increase operating costs within the network by 30%.
Delay or delete?
Last week, the Ethereum development team raised a hard fork called Muir Glacier, again raising the issue of delaying the difficulty bomb. The discussions were not only between platform developers, but also with miners and other market participants.
Possible solutions discussed include delaying the difficulty bomb mechanism and completely eliminating the difficulty bomb. In particular, Ethereum developer Aleksey Akhunov said that the risk and profit ratio brought by using this mechanism "are not high so far."
At the beginning of this year, Afri Schoedon, a former developer of the Parity Ethereum client, suggested giving up the difficulty bomb completely and removing this mechanism from the protocol to eliminate the need to continuously delay its activation:
"I personally don't want to deal with it again (difficulty bomb). The Serenity phase will not happen this year, and it is likely that it will not happen next year. So why bother?
However, not everyone agrees. For example, Marcus Ligi, the creator of the Walleth Android wallet, believes that eliminating the difficulty bomb will result in a less frequent implementation of Ethereum network updates, and therefore, miners lack the incentive to update their software and equipment.
Therefore, the network will greatly slow down, and there is also the risk of resisting the transition to an updated version of the ETH blockchain, especially the version that will eventually implement the PoS algorithm. But, for example, Conner from Gnosis opposed the complete elimination of difficult bombs, referring to negative reactions from the community.
When will Muir Glacier hard fork be implemented?
Although Ethereum developers have not agreed on a long-term plan to use the difficulty bomb, in the short term, they have decided to postpone the mechanism for several years.
Muir Glacier coordinator James Hancock said the hard fork would "delay the bomb as reasonably as possible". This will give developers time to know if it is necessary to modify the Ice Age mechanism in order to make its behavior predictable or otherwise remove it entirely.
According to Tim Beiko, product manager of blockchain solution company PegaSys, this hard fork will be launched at a block height of 9.2 million, with an initial estimated time of January 6, 2020. If Muir Glacier succeeds, it will freeze the difficulty bomb until the next 4 million blocks, which means that Ethereum will not be threatened by the Ice Age in the next few years. Conner expressed his expectations to Cointelegraph:
"Before the block height of 9.2 million, there will not be much impact. The worst case we see may be the block time reaching 18 seconds, but this is not enough to cause problems."
Hudson Jameson, the core development liaison of the Ethereum Foundation, shared the same view, adding that Ethereum users and miners should know that the difficulty bomb will not pose a serious threat, and the only effect is to increase the block time . He told Cointelegraph:
"Although it will definitely be annoying, it is not important and it will be fixed quickly in Muir Glacier in January. In the past, we have been delaying the release of the difficulty bomb and plan to upgrade again through the Muir Glacier network in January next year. Upgrade. The next difficulty bomb delay code will have a long delay built in. We will also discuss how to deal with the different options for Muir Glacier's difficulty bomb. "