At some point between January 14 and 18, Ethereum will be undergoing a major upgrade which will require a hard fork in the Ethereum blockchain. Known as the Constantinople upgrade, this hard fork introduces a raft of updates aimed at improving Ethereum’s performance, scalability, and efficiency.
Ethereum has seen significant positive price movement in the run-up to Constantinople. 2018’s protracted bear market reached its lowest ebb for Ethereum in December, with the price hitting an 18-month low of around $83 on December 15. Ethereum has hit highs of almost double this figure in the week since, peaking at $160 on January 5.
Whether this upward trend will continue through 2019 remains to be seen. But the return of bullish sentiment has been widely welcomed after a brutal year for those invested in Ethereum. After hitting an all-time high of almost $1400 in mid-January 2018, ETH lost more than 96% of its value on the way to mid-December’s low-point. Ethereum slipped below XRP in cryptocurrency market cap rankings several times towards the end of 2018. The recent uptick has returned Ethereum to second place behind Bitcoin.
So how exactly will Constantinople change Ethereum? And what are the short and long-term effects likely to be? Here we’ll dive into some of the biggest questions surrounding the hard fork and its significance for Ethereum’s future development.
What Will Constantinople Do?
Constantinople will enact five main proposals for improving Ethereum. These proposals were agreed upon after months of discussion between Ethereum’s core developers. Launching Constantinople in January was agreed upon following experimentation with implementing Constantinople on Ethereum’s Rosnet public test net back in October. Four of the proposals are aimed at making short-term scaling improvements, while the most controversial will see a reduction in the rewards offered to Ethereum miners.
EIP 145: Bitwise Shifting
This proposal is primarily aimed at making smart contracts cheaper to operate. Bitwise Shifting is a technique which will help Ethereum process information contained within smart contracts more efficiently. The expected result is that smart contracts will require as much as 10 times less gas to operate.
EIP 1052: Optimizing Complex Smart Contract Code
This proposal will improve smart contract efficiency by reducing the amount of redundant information that needs to be checked. EIP 1045 will allow smart contracts to perform checks by looking up only a fraction of the information that was previously necessary. This means such checks will use less gas, making complex smart contracts much cheaper and more efficient.
EIP 1283: New Pricing Model for Contract Storage (SSTORE Opcode)
This proposal aims to more efficiently monitor changes in the state of smart contracts stored on the Ethereum blockchain. In many cases, it will result in a reduction of the amount of gas required to store a smart contract. There should be no scenarios in which storing a smart contract becomes more expensive compared to the current set-up.
EIP 1014: Introducing Off-Chain Transactions
A big problem for many established blockchains is the inefficiency of broadcasting every transaction to the entire network. Similarly to Bitcoin’s Lightning Network, EIP 1014 will allow Ethereum’s smart contracts to interact with off-chain data. This should result in much greater efficiency for many transactions and greatly improve Ethereum’s scalability.
EIP 1234: Reduction in Block Mining Rewards
By far the most controversial proposal being implemented is a reduction in the block rewards offered to miners, from 3 to 2 ETH. This is seen as necessary to stop Ethereum’s built-in mining difficulty increase from reaching a point where Ethereum becomes essentially unminable. Known as “the difficulty bomb,” this could result in an “Ethereum ice-age” if left unchecked. The reduction in block mining rewards should increase the speed at which new blocks are created and delay the difficulty bomb for another year.
The overall effect of Constantinople should be to make Ethereum faster, cheaper, and more efficient, while also staving off the potential catastrophe of an Ethereum ice age.
What Won’t Constantinople Do?
Constantinople is a major step in Ethereum’s development, but it is just one step of a larger road map for Ethereum’s future development. Many of the improvements are short-term scaling solutions aimed at improving Ethereum’s efficiency while longer term solutions are being developed.
Some of the most significant long-term scaling solutions include a switch from a Proof-of-Work (PoW) mining-based consensus mechanism to Proof-of-Stake (PoS), as well as sharding, which aims to greatly improve efficiency by breaking up Ethereum’s blockchain into a network of smaller interconnected shards. Much of Constantinople’s purpose is to move Ethereum a step closer to these long-term goals.
Why Isn’t Constantinople Scheduled for a Precise Date?
Constantinople has been scheduled to be implemented with the creation of block 7080000 on the Ethereum blockchain. As block creation times vary depending on network usage, Constantinople could be activated at any time between January 14 and 18. Most online commentary points toward Constantinople being in effect by January 16 at the latest.
Will Constantinople Create a New Coin?
Probably not. The Constantinople upgrade was agreed upon following months of discussion and testing involving Ethereum core developers. If Ethereum miners all switch to the new version of the Ethereum blockchain after block 7080000, the Constantinople hard fork will be the only active version of the Ethereum blockchain. During October’s discussions, one developer specifically suggested using the term ‘Constantinople Update’ rather than ‘Hard Fork’ to avoid the kind of confusion that followed previous major cryptocurrency forks.
Aside from miners, virtually every significant cryptocurrency exchange has voiced support for the update. Some, including Huobi and KuCoin, have explicitly stated they will distribute any newly-created coin stemming from the hard fork to their users.
This is in contrast to the controversial Segwit proposals that resulted in the contentious hard forking of Bitcoin Cash from Bitcoin back in August 2017. At that time, there was enormous disagreement between competing sides of the debate about upgrading Bitcoin. Similarly, Bitcoin Cash itself hard forked in November following disagreement between supporters of Bitcoin Cash ABC and Bitcoin Cash Satoshi Vision. For a full analysis of that contentious hard fork, you can read our article on the hard fork and the resulting Bitcoin Cash civil war.
Ethereum itself forked into two separate cryptocurrencies following the hack of The DAO venture capital fund in 2016. Vulnerabilities within The DAO’s smart contract allowed hackers to move 3.6 million ETH out of The DAO’s account. A hard fork was implemented to reverse the theft, but many felt that this was a betrayal of blockchain’s supposed immutability. Today’s Ethereum is a continuation of the upgraded cryptocurrency created as a result of the hard fork. Ethereum Classic continued without reversing the theft of The DAO’s funds. Anyone holding ETH at the time of the hard fork received an equal amount of the new ETH and ETH Classic after the blockchains diverged. Ethereum Classic has experienced a similar upswing to Ethereum in the lead-up to this latest hard fork, moving from $3.36 on December 7 to $5.52 on December 27.
Constantinople’s launch will be preceded by the creation of two new cryptocurrencies performing a hard fork of the Ethereum blockchain: Ethereum Classic Vision and Ethereum Nowa. However, these hard forks are completely separate from Constantinople and are in no way endorsed by any Ethereum core developers. In fact, as we explained in this recent article, both seem like cynical attempts to cash-in on the hype and headlines being generated by Constantinople.
What Happens After Constantinople?
As already mentioned, Constantinople is just one step in Ethereum’s long-term development. It is the second major step of Ethereum’s Metropolis stage, which is the third phase of Ethereum’s long-term road map toward Serenity.
The four phases of Ethereum’s development are:
Frontier – the earliest implementation of Ethereum. Frontier was a culmination of development work that began in 2013, with the finished product going live in July 2015. This phase gave outside developers their first chance to play around with Ethereum’s possibilities.
Homestead – launched following the mining of block 1,150,000 in early 2016. Homestead was intended to stabilize the network and increase its functionality and efficiency.
Metropolis – launched with the Byzantium update at block 4,370,000 in October 2017. Constantinople follows Byzantium as the second of four planned updates contained within the Metropolis phase.
Other expected upgrades for later phases of Metropolis include the implementation of Zk-Snarks, or “zero-knowledge proofs.” Already utilized by the privacy coin Zcash, Zk-Snarks will conceal data contained within complex smart contracts from public view, thus making Ethereum much more attractive to large enterprises wishing to store data securely. Vitalik Buterin has also enthused that Zk-Snarks can massively improve Ethereum’s efficiency by allowing large amounts of data to be compressed into succinct proofs. This CoinDesk article details Zk-Snarks potential impact on Ethereum scaling, including Buterin’s claim that it could allow Ethereum to process as much as 500 transactions-per-second. The end state of Metropolis will see Ethereum move to a mixed PoW and PoS consensus mechanism, with every 10th block being created through PoS.
Serenity – this is the proposed final state for Ethereum. At this point, Ethereum will have moved completely to a PoS consensus mechanism. The complex problem of introducing Sharding to the Ethereum blockchain will also have been completed at this stage. Serenity is expected to be at least a year away, with work on implementing its complex upgrades still on-going.
Will Constantinople Spark the Next Bull Run?
Markets have reacted favorably in the run-up to Constantinople, but Ethereum is still a long way from the insane highs of January 2017. The most bullish will point to Byzantium’s effect on Ethereum’s price, precipitating a surge from $300 in October 2017 to the all-time high of $1,400. But there were many other conditions at play to create the wild bull run that affected the entire cryptocurrency market. Vitalik Buterin cautioned that the price was purely speculative, with the move from $300 to $1,400 being just as irrational as the subsequent slide to $83.
What Constantinople will do is make significant improvements to Ethereum’s functionality in preparation for the subsequent steps toward Serenity. Greater functionality should make Ethereum ready for greater real-world adoption. It will also help Ethereum hold its own against the many projects which currently boast of greater speed and lower cost than Ethereum. Constanintople is unlikely to spark a rapid return to the wild speculation that propelled Ethereum above $1,000 a year ago. But it will be a key component in Ethereum’s attempt to attain true real-world adoption.