Smart contracts are not the only "smart" mechanisms in the Ethereum blockchain. A "difficulty bomb" is one more feature of the network which will help to elegantly (but not painlessly) provide support for Ethereum's software hard fork by all network members.
Are We Already Exploding?
Since hard fork, unlike soft forks and velvet forks, assumes such changes, after which the new version of the network will be incompatible with the old one, so that the blockchain remains unified, all users should agree with the new rules. If the share of dissenters is significant, then it can suffice for the development of a parallel network that will work according to the old rules. This story is already familiar to the Ethereum blockchain due to past disagreements in the community about the return of funds of The DAO in the summer of 2016, as a result of which Ethereum split into two networks. The "upgraded" version was the main Ethereum, and the old ("classic") rules support Ethereum Classic.
The "bomb" was laid in Ethereum for another purpose, which is the smooth transition into the upcoming hard fork, which will allow the blockchain to work in a coordinated manner with the current Proof-of-Work consensus algorithm on Proof-of-Stake. The mechanism of the "difficulty bomb" was introduced on September 7, 2015 (on the 200,000th block), soon after the launch of the main blockchain. It is programmed to exponentially increase the complexity of the network. The network will "eventually reach an ‘Ice Age’ of sorts. The difficulty will simply be too high for anyone to find a block. This will allow us to introduce PoS, perhaps via Casper, if it proves itself," said Ethereum then-CCO Stephen Tual.
In early 2016, Vitalik Buterin explained that for a while, the bomb would "tick" very slowly: "After around block 3,500,000, it would go up faster than it goes down, and the protocol would quickly freeze. Now, difficulty can adjust down faster than that if the block time is slow enough, and so even after this point, there is an equilibrium. At block 3.5 million (one year from now), we would have an equilibrium block time of 25 seconds for 100,000 blocks (about one month); then we would see 35 seconds for 100,000 more blocks (now 1.4 months); then 55 seconds for 2.2 months, then 95 seconds for 3.8 months, and so forth until we get 655 seconds for 26 months (ie. slightly worse than Bitcoin), and only after that does the protocol break because of the cap of 99/2,048 downward adjustment, and that final doom does not take place until 2021."
Thus, as the complexity increases, the time of extraction of the block will grow, and the economic incentive for the miners will weaken. At the same time, the ultimate goal of the transition into Proof-of-Stake will change the very nature of mining. Unlike Proof-of-Work, in which the miners compete for primacy in the extraction of the block with the help of their computing power, with Proof-of-Stake, the validators are rewarded in proportion to the share of the Ether they hold. With such a network device, "mining" no longer exists, and the process of confirming transactions is called "forking.”
On the Way to Constantinople
The Ethereum roadmap, presented in 2015, designated four stages for the development of the network: Frontier, Homestead, Metropolis, and Serenity. Metropolis was later divided into two stages: Byzantium, activated last year, and Constantinople, which is scheduled to be released on approximately October 30. It is designed to improve network performance and reduce commissions, preparing the network for larger scalability improvements, sharding, and Casper.
In late July, the developers reported that four proposals for the improvement of Ethereum (EIP) have already been approved and are at the implementation stage. Tentatively, this stage was to be completed on August 13, after which the code would be tested in a special test network during the Constantinople stage.
The number of EIPs already adopted includes EIP 210 (reorganizes the method of storing block hashes), EIP 145 (increases the speed of EVM calculations), EIP 1014 (adding state channels), and EIP 1052 (a new opcode that increases the interaction of smart contracts and speed their validation). "Most of the EIPs have been implemented," said Peter Szilagyi, a leading developer of the main Geth Ethereum client, at the July developers meeting.
Several EIP solutions are still under discussion, including a possibility of postponing the "difficulty bomb,” as well as the reduction of the mining rewards. The division of opinions on these issues became apparent last Friday when the developers arranged a video conference to discuss changes in the code together with key community representatives. "We've had a lot of community enthusiasm for the forks. It's weird hearing about people watching and participating in discussion around the bi-weekly core developer calls," said Hudson Jameson, communications specialist at Ethereum Foundation. Afri Schoedon, communications specialist for Parity Technologies, also said that Constantinople attracted an unusually large amount of attention and enabled the community to participate in important and ambiguous protocol changes, "In the past, contentious proposals were either accepted straight away or stalled forever."
The joint discussion did not yield a compromise. On Monday, August 26, Brian Venturo, CTO of the Atlantic Crypto mining startup, shared the results of the meeting on Medium and singled out EIP 1295 as the only controversial proposal that would not reduce security. "If the security of the Ethereum network is compromised, the party is over," Venturo writes.
EIP 1295 does not limit the release of new Ethers (which are part of the reward for the miners), but it reduces the reward for uncle blocks or blocks that were not included in the main network and are in a parallel chain, at the same height as the valid blocks. Despite the fact that they did not help in the processing of transactions and did not get new coins, Ethereum encourages the creators of such blocks, because they increase the decentralization and security of the network.
The miners agree that a too strong reduction in revenues will reduce the security of the network and force them to support other cryptocurrencies (this is especially true for users of less productive equipment, such as the GPU)." Cutting the block reward now will have an impact on the dispatch of mining hardware and will directly impact the amount of hardware securing the network," Venturo said in a conversation with CoinDesk.
And although the miners naturally oppose the capping of supply (and, as a consequence, their incomes), ordinary users, noting a significant drop in price (over the summer, the asset has fallen in price by more than two times), see a way out in limiting the issue of new coins. "We agree that the ETH issuance may be too high, but we also believe that adjusting it under the current market conditions will put undue risk on the security scale of the network," Venturo said in a discussion on GitHub.
Not Only Buterin Is against It
Trader Eric Conner opposes EIP 1295 and protects the benefits of EIP 1234, a proposal that reduces the reward for a block to two Ether and, accordingly, reduces the reward for uncle blocks (today's "main" reward of three Ethers (before fees) and 0.625 to 2.625 Ether for uncle blocks was installed after the previous protocol update Byzantium).
"3/ Taking a quick look at the ETHBTC market cap ratio vs. ETHBTC daily miner incentive ratio (blocks+uncles+fees), we see that Ethereum has historically overpaid when compared to Bitcoin. We can also compare those ratios directly to see the current overpayment range is 1.5x-2x. 4/ If we consider EIP 1234 and the reduction to two ETH, we see that these ratios start to come in line nicely," Conner wrote on his Twitter. In his opinion, the reduction of rewards is necessary to preserve the value of the network.
At a recent meeting of developers in support of EIP 1234, Casper developer Danny Ryan said, saying that cutting the reward to two Ethers seems to be a "reasonable compromise" between the interests of traders and miners.
The investor Spencer Noon also criticized EIP 1295: "I'm completely unsupportive of EIP 1295 and I question the motive of its author (Atlantic Crypto Corp.). ACC is a mining company run by former hedge funders. This has nothing to do with "network security.” A block reward reduction would hurt their bottom line," Noon wrote in his tweet.
Several posts on Reddit repeat this rhetoric. In response, the mining company withdrew its offer but insists that the issuance of new coins, going as a reward to the miner, should not fall below the current level of three Ethers.
The weighty word of Buterin himself is also not in favor of EIP 1295. "I'm scared of this. With current uncle rates continuing to be around 20 percent and continuing to greatly differ by miner with lows of eight percent and highs of 40 percent, there are significant potential centralization risks if the reward differences between these pools are further exacerbated. Currently, Ethermine and Nanopool differ 20 percent in uncle rates (0.7 vs 0.9). With current reward levels, this leads to a three to five percent difference in revenue, but with the proposal, this could easily go up to 15 to 18 percent. This could further increase concentration," he wrote on GitHub.
On Friday, on August 31, the developers had to make a final decision on the contentious EIP during a video conference, and these proposals will be included in the updated protocol. "At the moment, we are moving quickly towards a solution," said Schoedon in a conversation with CoinDesk.