New Ether Ecosystem Developments are Coming but Many Say Ethereum’s Ice Age Upon Us
The Ethereum Ice Age
The arrival of the Ethereum Ice Age is imminent, but this should not cause distress in the Ethereum community. Although the name is portentous, the ice age should not be dreaded, nor should be the ‘difficulty bomb’ that is scheduled to come with it. Rather, these two (the ice age and difficulty bomb) are tools developed by the Ethereum team and will play a fundamental role in the implementation of Ethereum 2.0, the next major update on the Ethereum blockchain network.
This post covers everything regarding the ice age and the difficulty bomb. Specifically, it outlines the reasons for their establishment, what they are and why they are in the limelight. The ice age and difficulty bomb are some of the features that are expected to be introduced in Ethereum 2.0, alongside other functionalities such as sharding, plasma, and the Casper proof-of-stake consensus algorithm.
What Is The Ethereum Ice Age?
The Ethereum Ice Age is a scheduled slowdown of the Ethereum network that was established three years ago. Notably, the ice age stems from the difficulty bomb this is expected to be deployed on the Ethereum blockchain in the near future. The implementation of the difficulty bomb is likely to coincide with the transition from the current proof-of-work (PoW) consensus algorithm to the Casper proof-of-stake algorithm.
Since its inception in 2015, the Ethereum network has been using a proof-of-work algorithm known as ETHhash. Similar to other blockchain networks, Ethereum relies on mining to guarantee the security of its network. This process usually involves several miners who use powerful computers to compete against each other in solving complex cryptographic puzzles. The first miners to solve the puzzles is granted the right to create a new block on the blockchain and receives a cryptocurrency token as a reward for their effort.
A majority of digital currencies, Ethereum included, are designed in such a way that the complexity of the mining algorithm adjusts according to the number of users that are currently trying to solve the cryptographic puzzles. This mechanism is employed to ensure that the rate at which the solutions are reached as well as the rate at which new tokens are issued remains constant over time, although miners are regularly acquiring newer and more powerful mining hardware.
As the name suggests, the difficulty bomb intends to increase the difficulty of the mining process, albeit over a short period. An increased difficulty in the mining process will translate to prolonged block creation processes. Essentially, the difficulty bomb will so powerful that it will temporarily create a halt in the existent Ethereum network, a state which is called the Ethereum Ice Age.
The Reasons For Deploying The Difficulty Bomb
Initially, the implementation of the difficulty bomb seems disastrous, especially because it stalls the entire blockchain network.
As mentioned earlier, the difficulty bomb will be deployed during the transition from the current PoW consensus algorithm to the Casper PoS algorithm. The significance of this adjustment will necessitate the conduction of hard fork on the Ethereum blockchain. After the inauguration of the Casper update, there will be two Ethereum networks – the older which uses PoW, and the newer option that uses PoS.
Typically, hard forks present a risk to digital currencies because miners might resist the shift to the newer chain and instead continue to mine on the older blockchain. For instance, the Ethereum network conducted a hard fork in 2016 to refund users after the devastating DAO hack, but a section of the clients refused to migrate to the new chain this resulted in the creation of a parallel blockchain, later named the Ethereum Classic network.
To avoid the recurrence of the incident mentioned above, the Ethereum development team designed the difficulty bomb as a means of convincing miners to shift to the PoS chain after the Serenity har5d fork hic is inclusive of the full Casper update. Fudame4ntally, the difficulty bomb will increase the complexity of mining on the older PoW network such that it becomes unprofitable, forcing the miners to migrate to the PoS network.
In a blog post published in August 2015, the then chief commercial officer of the Ethereum network, Stephen Tual, gave the reasons behind the development of the difficulty bomb. Specifically, Stephen noted that the Ethereum community was curious about the method the developers would use to transition from a PoW system to PoS. in this regard, he revealed the planned introduction of a ‘difficulty adjustment scheme' (the difficulty bomb). The scheme would force the conduction of a hard fork within 16 months and an increase in complexity over time, becoming noticeable after a year. The full manifestation of the scheme would coincide with the Serenity milestone and would be characterized by an increased block generation time.
Going by the timeframe that Stephen described on his blog, the Ethereum development team is way off its originally intended schedule. In fact, the deployment of the difficult bomb has been postponed on multiple occasions over the past few years because of the prolonged development of the Casper update. Since the bomb must be released alongside Casper, the delayed development of Casper has resulted in the delayed implementation of the difficulty bomb.
When Will The Difficulty Bomb Go Live?
Lately, the difficulty bomb has been a hot subject of discussion, mainly because the Ethereum team announced that the Casper update will not be ready in early 2019, the time at which the bomb was set to be deployed. Consequently, the implementation of the bomb will once again be put off to provide additional time for the completion of the Casper update development.
The Ethereum network is currently prepping for the impending Constantinople hard fork, slated for October 30, 2018. The fork is expected a toned-down version of PoS that will operate besides the existing PoW algorithm before the eventual launch of the full Casper update next year.
Due to the delayed release of the Casper update and the upcoming deployment of the difficulty bomb, a significant number of Ethereum community members have made suggestions for the adjustment of the Constantinople update to address some issues. Most of the proposals are aimed at the difficulty bomb. For example, proposal EIP1234 recommended that the difficulty bomb should be postponed for 12 months and the mining rewards should be reduced from the current 3 ETH per block to 2 ETH per block. In this case, the proposal hoped that the delay will allow for the finalization of Casper’s development and that the reduced mining reward would ensure that the newly mined Eth would overwhelm the network as a result of the reduced mining activity.
In addition, the reduction of the mining rewards is likely to have substantial effects on the rate of inflation of the Ethereum token. Unlike most of its contemporaries, the maximum supply of Ethereum tokens is not limited. Therefore, ETH is more vulnerable to inflation as compared to other virtual currencies. Before the reduction proposed by Constantinople, the rate of inflation of the Ethereum token was 7.45. In comparison, Bitcoin’s rate is 4.25%. By reducing the mining rewards from 3 ETH per block to 2 ETH, Constantinople will align the ETH inflation rate to match that of its peers and ensure that the mining rewards conform to the value of the network.