Ethereum Proposal is Primed to Delay ‘Difficulty Bomb’ and Reduce Block Reward

John Medley

Earlier today, 14 Ethereum developers met over video conference to discuss changes to the proposed ‘difficulty bomb’ and block reward.

They agreed to support the EIP1234 that would decrease block reward from 3 ETH to 2 ETH as well as delay the ‘difficulty bomb’. The proposed EIP1234 would be added to the Constantinople upgrade, scheduled for October.

The postponement the difficulty bomb – a feature designed to increase the difficulty of mining rewards, making mining less attractive – has been received well by the community despite the fact it is considered a controversial topic - especially for miners invested heavily in hardware.

Many traders are in favour of the 2 ETH block reward as it reduces Ethereum’s inflation rate which is currently greater than that of Bitcoin.

It is thought that the reduced mining reward would constrain the supply, in turn reducing the selling pressure from miners. According to a Twitter thread from Eric Conner, the Ethereum network has paid $6.6 billion to miners over the past 365 days:

Some members of the community, however are not happy with the lack of discussion. Ethereum miners and investors who were present at the previous meeting regarding the Constantinople upgrade were excluded from today’s meeting. Some have seen this as a controversial decision, because the difficulty bomb and block reward reduction is likely to have a greater impact on miners than developers.

With over a month until the Constantinople upgrade, it remains to be seen whether the wider community of investors, traders, miners and developers will rally in support of EIP 1234.

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Vitalik Buterin Proposes Using Bitcoin Cash As Data Layer for Ethereum

Ethereum (ETH), the world’s largest platform for building and deploying decentralized applications (dApps), is currently facing significant scalability problems. This, as the size of the Ethereum blockchain has grown much larger than what the project’s founders may have anticipated - when the smart contract platform was first launched around five years ago.

Bitcoin Cash (BCH) May Serve As Data Layer for Ethereum?

In order to address Ethereum’s scalability challenges, Vitalik Buterin, the Co-Founder of Ethereum, suggested using blockchain networks that have relatively lower transaction fees.

Buterin argued that Ethereum could leverage smaller blockchain-based platforms by using them as a data layer. According to Buterin’s assessment, Bitcoin Cash (BCH) may “fit the bill perfectly” as it has a relatively high data throughput rate.

Bitcoin Cash Blockchain’s Throughput Rate Is Almost 7x Greater than Ethereum

Currently, the Bitcoin Cash blockchain can process around 32 MB of data in roughly 600 seconds, which is equivalent to about 53,333 bytes/second. This is almost 7x faster than Ethereum’s processing capacity - as the leading smart contract platform can only handle around 8 kilobytes (8,000 bytes) per second.

While the Bitcoin (BTC) blockchain may have the highest level of security, transaction fees on its network might be too high for it to be practically used as a data layer. Meanwhile, the Bitcoin Cash network may be more suitable for data processing as its transaction fees are considerably lower (at present) than most major crypto networks.

Might Be Easy to Validate BCH Blocks Inside Ethereum

Online tools such as BTCRelay may allow developers to easily verify Bitcoin Cash blocks inside of the Ethereum network. According to Buterin, the tool would just have to be repointed toward the Bitcoin Cash blockchain, in order to validate transaction data. The BCH network appears to be well-suited for this process due to its low transaction fees.

Although the BCH network may seem ideal as a data layer, Buterin noted that the cryptocurrency’s 10 minute block times may be considered its biggest weakness. However, the Russian-Canadian programmer believes this issue may be resolved in the forseeable future.

Ethereum Classic Blockchain May Be “Another Natural Alternative”

Notably, Buterin said that the Ethereum Classic (ETC) blockchain might be “another natural alternative”, however it’s not as scalable when compared to the Bitcoin Cash network.

As noted by Buterin: 

There’s a large space of quite powerful and effective scalability solutions that rely on a non-scalable computation layer (ie. the current ethereum chain suffices) plus a scalable data layer.

By using “interactive” computation techniques, like Truebit, developers are able to compute the current state on “the Ethereum side.” This process depends on the “data availability verification guaranteed by the data layer”, which ensures that “fraudulent” submissions can be “detected and heavily penalized”, Buterin wrote on the EthResearch forum website.

A Temporary Solution Until Ethereum 2.0 Is Launched

He also clarified that potentially using Bitcoin Cash or Ethereum Classic as data layers would be a short-term or temporary solution. This, as Ethereum 2.0, a major system-wide upgrade, will be released in order to improve the overall efficiency of the world’s largest dApp development platform.