Ethereum is easily the most versatile and dynamic invention in the blockchain era. For a long time, Ethereum has been the second-largest cryptocurrency, second only to Bitcoin. Furthermore, smart contracts have fundamentally revolutionized the cryptosphere. For a platform that has been in a usable format only since 2015, this ascendance is remarkable. Smart contracts have complex applications that are disrupting many sectors in real life.
The Ethereum blockchain has subsequently become the foundation for numerous other cryptocurrencies thanks to its ability to run self-executing and autonomous code. In general, the brilliance of Ethereum is providing developers with tools to build decentralized applications that run on blockchain technology. That means immutability, reliability, and censorship resistance.
Even then, Ethereum has had to undergo some changes to adapt to the prevailing user interests. Initially, proof-of-work (POW) mining seemed suitable for many cryptocurrency platforms. However, as popularity increased, issues like scalability in Bitcoin and Ethereum became evident. These issues necessitated structural adjustments to make cryptocurrencies and their respective platforms adaptable and fit for the market.
Accordingly, Ethereum activated the Constantinople and Petersburg Hard Fork on February 25, 2019, after several postponements, taking it on the verge of Serenity (also known as Ethereum 2.0). To achieve Serenity, it has taken the form of a series of hard forks and upgrade phases to complete the evolution.
Let’s look at Ethereum’s timeline up to the most recent upgrade.
History of Ethereum Upgrades
The Ethereum blockchain came into public existence in July 2015 after the ninth and final proof-of-concept open testnet. Ethereum founder Vitalik Buterin announced a reward of 25,000 ETH for developers who had contributed to stress-testing the network.
The stress-testing particularly focused on how the network would handle high-traffic. Therefore, the core areas of focus were transaction activity, virtual machine usage, mining prowess, and general punishment. Scalability was, and still remains, the biggest issue for major cryptocurrency platforms.
For Ethereum, this is even more pressing because of the pressure to offer scalable solutions for enterprise customers and developers. The stress-testing concluded with the mining of the Ethereum genesis block on July 20, 2015. Subsequently, the Ethereum community continued to grow.
Here are the basic features of the raw Ethereum Frontier chain:
- Block Reward: This is a basic feature of decentralized cryptocurrencies where miners get a reward in ETH when they successfully mine a block into existence on the Ethereum blockchain. Frontier had a block reward of 5 ETH per block.
- GAS: Gas essentially refers to the price value that Ethereum transactions or smart contract need to reach completion on the Ethereum blockchain platform. Initially, the gas limit per block was hardcoded at 5,000 gas. This provided buffer time to allow miners to start operations and allow early adopters to install their clients. The gas limit was automatically removed after a few days, and the Ethereum Network was henceforth capable of handling transactions and executing smart contracts.
- Canary Contracts: These were a part of Frontier to notify users of bad or vulnerable chains. Canary contracts got either a “0” or a “1.” Users who had an issue got a “1” and were notified to ensure they wouldn’t mine. Canary contracts gave Ethereum developers a tool to prevent operations or transactions on the network should something begin to go wrong. In that context, it was a major feature in creating a protection mechanism early on in Ethereum’s existence.
The first Ethereum hard fork was executed on May 14, 2016, at a block height of 1,150,000. In effect, the Homestead upgrade removed the canary contracts. Additionally, Homestead introduced new code in Solidity, the programming language used on Ethereum, and added the MIST wallet. This feature allowed users to hold or transact ETH and write or deploy smart contracts.
What is significant about the Homestead upgrade is that it was one of the earliest implementations of Ethereum Improvement Proposals (EIPs). These are proposals that the Ethereum community gives and are included in the network upgrades. The Homestead upgrade included three EIPs:
- EIP 2.1, which increased the cost of creating smart contracts via a transaction from 21,000 gas to 53,000 gas. Before this, the cost of creating a contract using another contract was more expensive than transaction costs. This EIP incentivized users to go back to creating contracts via contracts.
- EIP 2.2, which invalidated all transaction signatures with an s-value greater than secp256k1n/2. That said, the Elliptic Curve Digital Signature Algorithm (ECSDA) could still recover precompiled contracts.
- EIP 2.4, which removed an incentive that allowed users to create blocks with slightly higher difficulty. As such, the upgrade stabilized block times between 10 to 20 seconds, which was in line with the overall approximate target time of 15 seconds per block.
EIPs are therefore a valuable channel for community participation and ensure the network applies user ideas for better output. EIP-8, for instance, was an improvement proposal for future network upgrades. Subsequently, all client software could accommodate future protocol updates.
The DAO Incident | July 20, 2016
The exploitation of a decentralized autonomous organization (DAO) in 2016 was a significant event in the timeline of Ethereum. This DAO was one of the standout features of the Ethereum ecosystem. The platform was intended to be a channel to disperse funds to various different Ethereum projects, and it raised $150 million in a token sale.
On July 20, 2016, however, an unknown hacker stole about 3.6 million ETH. The Ethereum community decided on an unplanned hard fork to restore the funds to the original wallets and seal the vulnerability. However, this was not a consensus decision, and some Ethereum users continued to mine and make transactions on the original chain.
As such, the original chain with the stolen ETH unreturned became Ethereum Classic. This incident was controversial, with some crypto users claiming that Vitalik Buterin had used the hard fork to bail out his friends and colleagues. Buterin has consistently denied this.
That said, the majority of the Ethereum community continues working off the forked chain, with the hacked ETH reverted to the original owners, making it the predominant Ethereum blockchain.
The third stage in the Ethereum roadmap is known as Metropolis. To get there, the network underwent two stages: Byzantium and Constantinople, respectively. Byzantium went live in October 2017, specifically at block 4,370,000.
Byzantium contained nine EIPs. This stage came in the form of a hard fork with a community consensus. Major improvements included the introduction of zk-SNARKS, the delay of the “time bomb,” the implementation of early proof-of-stake (PoS), transaction status receipts, and smart contract upgrades.
Constantinople is the second stage of the Metropolis upgrade. It is mostly considered a “maintenance and optimization” upgrade but has faced a number of delays to, among other reasons, eliminate security loopholes. The Constantinople upgrade went live at a block height of 7,280,000 on February 28, 2019, as the hard fork was activated.
Currently, the Ethereum network is in the Constantinople phase, with the first stage, Petersburg, executed in Q1 2019 and the second stage, Istanbul, set for activation in mid-October 2019. The hard fork coordinators insisted the decision was made through technical consideration and the drive for perfection rather than speed. The Petersburg phase of Constantinople has included five different EIPs, of which the “difficulty bomb,” the centerpiece of the upgrade, has taken center stage. The overall goal was to facilitate a smooth lockstep transition from POW mining to proof of stake (POS), which Vitalik Buterin said is more energy-efficient.
Of the five EIPs, four didn’t have any impact in the end, as they were largely technical optimizations enhancing the network’s performance. EIP 145, for example, is a bitwise shifting on the Ethereum Virtual Machine (EVM), further easing arithmetic operations in certain classes within Ethereum.
However, it was EIP 1234, proposed by Afri Schoedon, that slashed miners’ reward from three to two in what has been dubbed the “thirdening.” An inflation-adjustment hard fork, the total ETH in supply is reduced from 7.4 to 4.9 million per year, consequently reducing the annual ETH inflation from 7.8 to 4.9 percent. Unlike the Byzantium hard fork, where the network’s difficulty adjustment was decreased, the difficulty level didn’t change, resulting in natural miner attrition while effectively setting the foundation for Casper’s proof of stake.
The software upgrade did negatively impact the ETH mining industry in the sense that the reduction of mining rewards translated to low profits, and with low ETH prices at that time, the total recovery period became longer and even more unprofitable for small miners, forcing some to switch their computing power to other blockchains.
Eventually, the “difficulty bomb” will be activated, meaning it will take longer for blocks to be mined as the network readies for Casper. There are two proposals: Casper CBC (correct by construction), suggested by Vlad Zamfir, an Ethereum Foundation researcher, and Casper FFG (friendly finality gadget), advocated by Vitalik Buterin, the co-founder of Ethereum. As it is, Casper FFG will initiate the eventual rollout of Ethereum 2.0, with CBC likely complementing FFG in the future. Notably, Casper FFG will drive the initial phase, the Beacon Chain, whose testnet will go live in early January 2020.
The previous upgrades have made the Ethereum blockchain more secure and efficient. The DAO hack was an unintended upgrade, but it has since become a prominent fixture in the Ethereum timeline.
In the future, Serenity is the ultimate destination of the Ethereum blockchain. By the time Ethereum gets to the Serenity phase, the network will have completed the transition to proof of stake.
Other important upgrades will be the introduction of the Beacon Chain, sharding, and the eventual transition from the Ethereum Virtual Machine (EVM) to Ethereum-flavored Web Assembly (eWASM).
October 2019 Istanbul Hard Fork and What It Means for Prices
What lies ahead in the immediate future is the Istanbul hard fork. Ethereum Istanbul is a system-wide upgrade that will change a few facets of Ethereum functionality, including the data storage process, mining protocol, and code execution. The objective of this hard fork is to bring the network closer to developers’ needs by building dApps on the Ethereum blockchain.
The Istanbul hard fork will activate six EIPs. The introduction of the ProgPoW consensus will further entrench decentralization by balancing forces in the network. Ethereum’s Istanbul launch is set for October 16, 2019.
The changes from this hard fork are meant to ensure the network is cheaper, faster, and more scalable. These upgrades will ensure Ethereum remains competitive in the blockchain space in the face of upstarts like EOS and TRON.
- Align the cost of opcodes and computational costs as well as improve denial-of-service attack resilience
- Ensure layer-2 solutions based on SNARKs and STARKs are more performant
- Facilitate Ethereum and Zcash interoperability
- More creative functions for smart contracts
Impact on ETH prices
The uncertainty a hard fork creates affects digital asset prices, as has been observed in several networks with Bitcoin Cash being adversely affected. Similarly, Bitcoin hard forks, considering what’s at stake, have been notorious for price upheavals, and the Istanbul upgrade, though bringing a less pronounced impact, will likely show in ETH pricing.
Given the planned nature of most Ethereum blockchain upgrades, Istanbul will probably not rock prices negatively. Even if there is an initial dip or stagnation, the long-term impact of the Istanbul hard fork will likely be positive because of the upgrade’s improvements for scalability, cost, and operating speed.
Moreover, ETH is transforming in terms of how the currency operates. At the peak of the ICO boom, ETH attracted a temporary reservation demand and hoarding because investors needed a store of ETH. Then, as ICOs became less lucrative, prices went down dramatically.
However, ETH is getting more demand as utility for gas and investment due to speculation as more DeFi apps gain traction. This encourages the use of ETH as money in crypto circles. Incidentally, the use of ETH in gas fees, staking, and storage fees is more prominent, which helps promote ETH as a solid medium of exchange and store of value (SOV).
Considering everything, Istanbul is not only a necessary upgrade but can also herald a booming era for ETH prices. Presently, prices are edging higher, and immediate resistance has been observed to be at around $400. If Istanbul is successful, the ETH price rally to new 2019 highs will likely be accelerated.
As Ethereum approaches Serenity, the entire community is following keenly and participating to ensure this new era of blockchain utility comes true.