News that the new Ethereum (ETH) system update would go to testnet at the beginning of October caused a slight recovery for the Ether price at the end of last week.
From $170 at the beginning of Wednesday, ETH reached above $200 by early Friday, peaking at $225 by Saturday afternoon. Ether has been treading water since then, and was trading at just under $220 at the time of writing.
Known as ‘Constantinople’, Ethereum’s new upgrade will begin a series of fundamental transitions for the network. Made up of five updates, this will help shift the network away from a Proof-of-Work consensus model, lay the groundwork for ETH’s scaling solution, and bolster and support its smart contract infrastructure.
What is the Constantinople Ethereum update?
System updates on Ethereum count as hard forks. When the blockchain branches off, the ETH community agrees to switch across to the fork which includes all the new updates; without any users sending transactions across it, the old one simply becomes dormant.
Although they are supposed to be harmonious, system updates have been the scene of much infighting. The Ethereum community was split following the DAO hack in the summer of 2016 when hackers exploited a loophole and drained $50m’s worth of ETH from the project’s funds. The majority of users agreed on a system update that did not honor the hard fork; a minority disagreed and remained on the original fork as Ethereum Classic (ETC).
Constantinople is part of a wider-update, called ‘Metropolis’, first announced as part of the Ethereum roadmap back in 2015. It is designed to improve the overall security, scalability and functionality by addressing key technical points in the network’s code. The preceding one, known as ‘Byzantium‘, was launched in the middle of October last year.
There are five Ethereum Improvement Proposals (EIPs) included in the Constantinople updates; EIP 145, 1052 and 1283 help to improve the network’s efficiency when it comes to processing and checking smart contracts. 145 introduces a new technique, called ‘Bitwise Shifting’, that cuts down the number of operations needed for the Ethereum Virtual Machine (EVM) to process smart contracts; 1052 introduces a new compressed code with essential data that needs to be checked; 1283 cuts down the amount of gas that developers need to pay for smart contracts.
The other two updates help lay the groundwork for the networks’ long-term transition to a scalable, Proof-of-Stake protocol. Vitalik Buterin’s EIP 1014 includes a new scaling solution that relies on state channels, that help to minimize the number of actions needed for the network to process and confirm. EIP 1234 lowers the block reward for miners from 3 ETH, down to 2 ETH.
The update will increase the Ether price.
Although Ethereum developers have said that the new Constantinople update is unlikely to bring about noticeable changes for the average user, substantive network improvements will be a bullish signal for investors.
The Ether price has been on a downward spiral since the beginning of the summer. ETH has fallen from a high of $800 at the beginning of May to a yearly low of $172 last week: an 80% drop in a four-month period.
This has partly been because of continuing difficulties with scalability as well as a drying up of ICOs. Nearly 60 projects sold their Ether holdings in a month-long period beginning in mid-July; statistics indicate the amount sold was worth as much as $400m at contemporary prices.
Constantinople could help reverse the downward trend. Improving functionality will in the short-term keep users on the network, rather than moving onto rival platforms. Laying the foundations for major updates, the Caspar protocol, as well as scalability infrastructure, will show the community Ethereum is improving and addressing current pain points.
Morale is low in the Ethereum camp. That the Ether price rose when news got out that Constantinople would go to testnet at the beginning of next month shows good news has been long awaited.
Situated on the Bosphorus strait, Constantinople (now known as Istanbul) straddled two different worlds; it was considered by the Ancients to be Europe’s gateway into Asia. Ethereum’s system update contains that same symbology: its implementation will allow the Ether community to enter a PoS, scalable world.
The author is invested in ETH, which is mentioned in this article.