Istanbul Update – Is Ethereum Drifting Towards A Contentious Chain Split?
Ethereum Price: $208.99
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Programmatic Proof of Work (ProgPoW) is a variation of the Proof of Work mining mechanism that aims to “close the efficiency gap” between graphics card (GPU) and ASIC (specialized chip) mining. ASICs, which are employed by (mostly) large mining organisations, have been considered by many to negatively impact public blockchains due to their tendency to centralise hash power. GPUs on the other hand, are widely available to the retail market and help decentralize mining across a broad number of devices and locations. The existence of ASICs have squeezed the profit margins of GPU mining, which is now – for the most part – loss making.
GPU mining is, on the face of it, a desirable method for mining on public blockchains: not only does the network benefit from greater decentralization, but hobbyist miners are able to co-exist and be profitable alongside large mining organisations. A change to ProgPoW would reduce the impact of ASIC mining and open the door – once again – to GPUs. So why is the suggestion of a switch to ProgPoW contentious?
Switching Ethereum’s mining mechanism is a major deviation from the status quo. Any future updates which have not achieved broad community support can easily become contentious through the words of a few loud voices. And those loud voices are being picked up on social media and across cryptocurrency news networks with a few notable arguments against ProgPoW.
Proof of Stake is Coming
One such argument stems from Ethereum’s planned switch to Proof of Stake. Why change the Proof of Work algorithm at all – and risk splitting the network – if Proof of Stake would make PoW mining redundant in the next few years anyway?
“Black Swan” Events
And a chain split isn’t the only risk — as with any software change, it is possible that bugs or security holes are unintentionally introduced. Should an issue arise that was exploited and unnoticed for several or more blocks, the inevitable rollback on the network would heavily damage Ethereum’s reputation and price.
An Ethereum Split in 2019 Would be Messy…
The change is only made more contentious by the massive complexity that would follow a chain split today. Chain splits on networks like Bitcoin are relatively straight forward: at a given block number, the two chains go their separate ways with BTC-A and BTC-B operating on their own network. In the case of Ethereum, the network’s underlying token would split, but so too would every existing smart contract. Not only will all ERC-20 tokens split, every CryptoKitty, every Gods Unchained card, every Augur prediction market and every MakerDAO CDP would split too. The fallout would be horrendous and would require an unprecedented level of coordination by dApp developers.
Yet it would appear that ProgPoW has a high probability of being introduced in Ethereum’s upcoming hard fork, dubbed Istanbul. What’s worrisome to many is that the level of contention need only be minimal to successfully split the network. There is a short-term, artificial but very real financial gain for all stakeholders in the event of a chain split. Bitcoin Cash, Bitcoin SV, Bitcoin Gold and Ethereum Classic all created additional value for holders of the original coin — the hodling masses are quick to embrace the possibility of a chain split, strengthening the narrative of contention and gaining financially by doing so. A chain split is then exacerbated by exchanges, who are quick to list the new coins for profit, creating a sense of legitimacy as well as a speculative and long-lasting market with minimal value for users.
– Nick, Owner EthereumPrice.org
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