Ethereum is Entering the Ice Age

in ethereum •  6 months ago

ethice.jpg

Winter is coming

The difficulty-bomb is starting to expand.

Miners need more and more time to find new blocks.
This process shall help to improve Ethereum by switching to Proof of Stake !

The difficulty bomb isn't really noticable yet.
Since the beginning of this year the price of ETH increased dramatically.
Naturally Ethereum's hashrate and thus it's mining difficulty are following this growth.

But if you look into the historical charts you can see that difficulty and hashrate are slowly starting to drift apart.
Naturally they should be delayed synchronized (more hashrate -> increasing difficulty)

But in this case the Difficulty is running away and starts with it's programmed increase.

It is normal and important for the Difficulty of the cryptographic task for the miners to increase with the hashrate.
This can guarantee a specified blocktime even if the involved computing power is increasing.
This is used to fix parameters like coin inflation, transaction speed, etc.

But Ethereum is loosing it's balance of diffifulty and hashrate.
The Difficulty is increasing faster than the Hashrate.
As result the system is slowing down.

Previously the Ethereum Blockchain handled a Blocktime of 14 seconds.
Now it already takes 15 seconds to generate new blocks.
This doesn't seem to be that much, but this should be understand as a significant indication !

Simultaneously the number of new created Ether is starting to decrease.
In January and February Miners produced around 30.000 new ETH per day.
Today there are only ~ 27.000 new ETH created.

So far the effects of the difficulty bomb are harmless.
They are noticable while looking into the numbers, but tey aren't effecting
the usabilty of ethereum yet.

But the effects will dramatically increase within this year.
The Difficulty Bomb is growing exponential !
It is expected for the blocktime to reach 30 seconds per block this summer.
This will mean the supply of new eth and the network capacity has halved.
In the next month and years the difficulty will increase faster and faster until it become impossbile for the miners to find a block.
Than Ethereum will freeze...!


Planned obsolescence for soft switch to Proof of Stake

Ethereums ice age is no coincidence or mistake.
The difficulty bomb was planned by the developers.

It is used as kind of a planned obsolescence, which will ensure that a certain Ethereum version will be unusable at some point.
This shall spur the developers, miners and users to improve ethereum by participating on radical changes.
The great Hardfork debate we see in the Bitcoin space for more than 2 years now,
won't happen to ethereum on the basis of the difficulty bomb.

A second and maybe even more important reason is the switch of Ethereum from PoW to PoS.
(PoW = "Proof of Work" means miners are in competition for the block rewards while they are proving their computers are calculating compute cycles.)
(PoS = "Proof of Stake" means the miners use invested ether to simulate the actual mining process to compete for the block rewards.
"Miners" are called "Stakers" in this concept.)

Proof of Stake is environmentally friendly, lowers the threshold for initial investments into mining, allows for lower intervals between the blocks, and is a prerequisite for sharding the blockchain whereby Ethereum shall achieve almost endless scalability.
So it might be worth it to go this way !

The Roadmap of Ethereum to switch to Proof of stake seems to be elegant.
With the next Hard Fork, "Metropolis", mining and staking will be parallel possible.
The Stakers will use a "Caspar" contract to lock Ether and validate blocks.
At the same time, the creation of new blocks is further determined by the miners through Proof of Work.

The Difficulty-Bomb will cause that mining will be less profitable than staking at some point.


Ice Age reached Blockchain with Delay

Actually, the Ethereum Blockchain should have been practically unusable since late 2016.
But the Developers noticed that they had overestimated ethereums progress.
It wasn't possible to keep this deadline for PoS.
So with the Hardfork to "Homestead" version of Ethereum, they defused the difficulty Bomb.
Vitalik Buterin wrote about a year ago:
"... the ice age will now be very slow.
... from Block 3.5 million, we will have an average blockinterval of 25 seconds for about 100.000 blocks (about 1 month).
Then we will have 35 seconds for the next 100.000 blocks (about 1.4 month),
then ~ 55 seconds for about 2.2 month, then ~95 sec. for about 3.8 month,
and so on until we reach ~ 655 seconds for about 26 month"
The final downfall will occur around 2021 when the network will be almost freezed."

The increase of the difficulty and the blocktime will be more noticable in the coming month, but it is unlikely that effective functional restrictions will occur before spring 2018.

Until than the Ethereum developers should have already arrived the metropolis phase of Ethereum.

The Roadmap of Ethereum consists of 4 phases:

  • Frontier, Homestead, Metropolis and Serenity

Currently we are in Homestead, the stage dedicated to the creation of graphic wallets and security.
With Metropolis Ethereum wants to attack the mass market.
Parts of this new version will be the introduction of the Caspar Proof of Stake, which is still to run parallel to mining.
Only when the Ice Age really hits, Proof of Stake will push out the mining.
This will then initiate the Serenity Phase.
But while many changes for Metropolis are still complete, the final version of Caspar is still missing and there are still some disagreements.
Therefore the Developers haven't called a concrete date for Metropolis.
However, a release is planned in August or September.

Until then, the gaps between the blocks will have grown to more than 20, perhaps even 30 seconds.


References
https://bitcoinblog.de/2017/05/30/ethereum-der-winter-naht/


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The Roadmap of Ethereum to switch to Proof of stake seems to be elegant.

After reading your post, I see why it is an elegant transistion.

Great post.

Casper really is an elegant consensus mechanism with unique and attractive tradeoffs. You should check out Vitalik's posts on Casper's slashing conditions and dynamic validator sets as they both really show the care that has gone into a proper PoS design. The entire v1 implementation is fantastic - allowing for sharding and transaction finality under dynamic validator sets, the sort that will be seen running full nodes.

The great Hardfork debate we see in the Bitcoin space for more than 2 years now,
won't happen to ethereum on the basis of the difficulty bomb.

The ice age essentially forces the community to come to consensus, and initiate a full node referendum implementing one change: fix the ice age. By essentially requiring the network to hardfork at a specific point in time gives certain guarantees about the actions of the network in the future.

The ice age removes the doubt. Investors and users know that Ethereum must hardfork in the next few months or the real-world use of the network will be implemented. This helps ease the worries that surround hardforks - only present because of constant peddling by Bitcoin maximalists.

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thank you for your response.
you are really doing your homework sir !

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Been involved for a while now! OG Bitcoin evangelicalist right here.

It is expected for the blocktime to reach 30 seconds per block this summer.

lol noobs. :) :D

gonna be interested to see the price when Casper comes along.

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yes,
isn't it remarkable what the steem blockchain can do !?

let's see how metropolis goes.

It seems that every altcoin has its difficulties to scaling up, mostly the solution is POS.But it is hard to control the speed of the inflation in POS, so lastly a new altcoin will come to the market for alleviating the problem. It is just a vicious cycle....

good post!

But hey,

whilst miners have a harder time to find new blocks, atleast Putin is in talks with Ethereum over implementation in Russian banks.

That's fricking amazing and I don't even invest in ETH. Makes me hyped for you all!

Good luck and cheers,
@ashi2k

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Ethereum has exciting times ahead !

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Yes, I think so too, but I just can't seem to figure out its course long-term.

Do you know, where I could learn a bit more about Ethereum?

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what do you want to learn ?

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I want to learn about long-term goals, how ETH wants to reach them and eventual competitors.

Cannot describe it any better, because English is not my first language, but I hope, that you can understand, what I am trying to say here. :)

Also thank you for your engagement with your audience! Real value.

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maybe start with the talks and papers of Ethereums Decvon 1 and 2
and especially vitaliks, gavin woods.
Devcon 3 will take place in early november, Cancun Mexico
(https://www.youtube.com/user/ethereumproject/videos)

you could also look into the consensys meet up
https://www.youtube.com/channel/UCBeLEwM-yhIKuIxHTx0VzdQ/videos

r/Ethereum and r/Ethtrader are good places to keep updated on the progress.

@crypt0 is a passionated ethereum enthusiast and youtube vlogger, who is keeping his audience up to date on ethereum and other crypto's.

maybe you should first learn about ethereum and investigate it's internal projects and it's competitors later.

additionally the ethereum blog :
https://blog.ethereum.org/

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Oh wow, I didn't get a notification for your reply.

Thank you so much for providing these infos ^^ Definitely going to check them out now!

This is super interesting. I'm still learning about how blockchain tech works, specifically ethereum. Solidity seems pretty entertaining so far though.

@joshbreslauer Great contente, Is good to know about Etherum hashrate. Thanks for sharing.

This story makes me more certain that ethereum can be the bitcoin 2.0 shortly

yes truly learned something here :-) good article

@joshbreslauer after reading your post, i will hold Ethereum for longterm.

A very well written post and great explanation of some of the problems Ethereum is facing. I guess we will just have to wait for more info on Metropolis then :)

Agreed! Very good info too! :) If you get the chance you should upvote my latest post about altcoins blowing up! Thanks! :) https://steemit.com/cryptocurrency/@parkermorris/steemit-vlog-3-altcoins-will-blow-up

Ethereum's actual value is 0 usd. According to me ethereum won't last long.

nice work...

very interesting. thanks for sharing. I never thought into the switch this deep but this sure helped.

Hey. Cool post. Let's be friends.

The only reason the hashrate can't keep up is because we can't get video cards right now! No amd gpus in the entire world or else we would still be keeping up with the difficulty. Hopefully more will be produced soon.

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no.
the point is, the gap between difficulty and hashrate should be even bigger right now.
but the price increase caused a huge growth in mining.
the miners can't counteract the difficulty bomb !
they can lower the estimated rate, but an increase of hashrate in a way which would invalidate the bomb would be fairly irrational and is definitely impossible !

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I realize that, but I think you misunderstand me. Obviously there will be a point where it's impossible to keep up. I just don't think we are there yet and us miners would still be keeping up with it if there were any gpus available. It's been over a month since you could buy any real quantity of gpus so that means the hashrate has been stagnate compared to what it would be right now if there were plenty of gpus on the market. Hell just the people I know would have at least 200 more gpus online if it was possible to get them so that's another 5-6 GH/s and that's just from like 8 people.

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this to be true, is only on the basis of the rising eth price.

so maybe it gets smarter to invest in eth instead of mining equipment and electricity.
miners should collect eth to stake in the future.
the cryptospace is starting to FOMO, which is no sign for clarity and rationality.

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I for one am definitely holding my eth to stake. I realize mining eth won't last forever, but this equipment can be used for many other coins as well. There are plenty of profitable coins out there to mine with these gpus and that should hold true for a good while still so I have no plans to slow down anytime soon. Plus I find it to be a very fun hobby. This isn't all about profit and margins to me.

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alright. i get it...
do it !
we need miners !

Look now Ethereum price reach $352. It will keep going up along with Bitcoin.