Constantinople: Ethereum's Network Upgrade to Reduce Mining Rewards By 33%

Omar Faridi
  • Ethereum's Constantinople hard fork upgrade will aim to make processing information on its blockchain more efficient.
  • Mining rewards for Ether miners will be reduced from 3 ETH to 2 ETH (per block).
  • Several Ether miners have complained about the reduced incentives for mining ETH. 

Constantinople, the Ethereum network’s upcoming hard fork upgrade, will involve the implementation of five distinct ethereum improvement proposals (EIPs). The backward-incompatible update, scheduled tentatively for October, will make permanent modifications to Ethereum’s existing codebase, which are aimed at improving its network efficiency and fee structure.

Additionally, the Constantinople upgrade is intended to make the necessary (and incremental) changes required for the Ethereum blockchain to scale effectively. Addressing the smart contract platform’s severe scalability issues, Ethereum co-founder Vitalik Buterin has said that the world’s largest DApp network will eventually be able to process 1 million transactions per second (TPS).

"Difficulty Bomb" Delayed For 12 Months

Moreover, the Constantinople hard fork is expected to make adjustments to Ethereum’s economic policy, which partly focuses on delaying the difficulty bomb (for approximately 12 months) - often referred to as the Ethereum Ice Age.

As covered on CryptoGlobe, 14 Ethereum developers agreed during a video conference (on August 31st) that they would support EIP1234. According to Ethereum’s Github repository: 

The average block times are increasing due to the difficulty bomb ... slowly accelerating. This EIP proposes to delay the difficulty bomb for approximately 12 months and to reduce the block rewards with the Constantinople fork, the second part of the Metropolis fork.

EIP 1234

The overall response to postponing the difficulty bomb has been well-received (mostly crypto traders) by the Ethereum community, even though it will likely making mining the cryptocurrency less profitable. Notably, a number Ethereum’s Ether (ETH) token miners expressed their frustration regarding significantly declining rewards for mining ETH.

$0.05 Mining Reward, $150 Electricity Costs

Redditor Macrnonut revealed that he had switched to mining Ethereum Classic (ETC) because he claims only making 0.5 cents from mining ETH after paying $150 in electricity costs. Meanwhile, another reddit user said “it’s time to start selling (mining} rigs.”

Despite concerns regarding reduced incentives for mining Ether, Ethereum’s developers are moving forward with the Constantinople upgrade. The hard fork will reduce the payout to miners from 3 ETH to 2 ETH for every block mined on the Ethereum blockchain.

At present, the Constantinople codebase is in its final stages of review and testing, and an exact block number for when the Ethereum chain will fork has not been determined. The following interdependent EIPs will go into effect with Constantinople:

  • EIP 145 - more cost-effective and efficient approaching to processing information
  • EIP 1014: better approach to accommodating network scaling solutions such as off-chain transactions
  • EIP 1052 - an improvement on how contracts are processed
  • EIP1234 - 12-month delay of difficulty bomb; reduce mining rewards from 3 ETH to 2 ETH
  • EIP 1283 - a better way to monetize data storage changes (made by smart contract programmers)

 

Vitalik Buterin Explains Why He Cares About Price of Ethereum (ETH)

Siamak Masnavi

On March 20th, in New York City, Vitalik Buterin, the creator of Ethereum, talked to crypto-focused journalist Laura Shin at a live taping of her Unchained podcast (at the Columbia Graduate School of Journalism’s Pulitzer Hall), and answered questions on a wide range of topics. Here are some key highlights from this interview.

What Vitalik Thinks About Zcash (ZEC)'s 'Dev Tax'

"Zcash is interesting... Definitely, like big props to them for just doing that and being proud of that and saying like 'you know, we got a 20% dev tax, what's up man?'. I am very proud of them for doing that. So, a great job, Zucco! But on the other hand, they clearly haven't solved the problem of where to allocate the money because, right now, they just have this centralized allocation pool that goes to Zcash company, or these individuals, or these other individuals, and they have hard forks, and these hard forks can decide to reallocate the pool, but then what process do they use to decide, and so it's definitely very far from the ideals that a lot of people see cryptocurrencies as having... It's still an improvement from no funding... It would be really nice if there was some decentralized process for achieving the same thing."

Why the Price of Ether (ETH) Is Important

"I'm going to be really candid because that's the right thing... Some of the earlier rhetoric, especially veering on the more extreme side of the price not mattering at all, in part was counter signaling to distinguish ourselves from other crypto projects that just do pumping and lambo-ing way too much, but another thing is that it was about minimizing legal risk by basically trying to make the project seem more distant from something that will be covered by financial regulation... 

If people try to claim the price doesn't matter at all, they [the financial regulators] are totally going to see through that...

I can tell you... why the price being higher than lower... is good.

One of them is, obviously, security. So if the price is zero, the network can't be secure, and that's true in Proof-of-Work or Proof-of-Stake. 

Another reason is, obviously, that there's a lot of projects who in the ecosystem hold cryptocurrency... and if the price is higher, then they'll have more money to do the things they want to do...

Especially, the security concern is a totally legitimate technical argument.

There are members of the Ethereum community who just say that 'Ether is a cryptocurrency and we want it to be more of a cryptocurrency'...

The Ethereum Foundation doesn't have a monopoly on Ethereum messaging, or even a hegemony on Ethereum messaging at this point...

The thing I am absolutely opposed to is engineering pumps for the sake of pumps because that's just a short term that's fundamentally dishonest. The thing I am definitely in favor of is not doing stupid that would lead to the price going to zero. So, one example of that would be having an issuance of like 100 million ether every year. Regardless of what other consequences that has, that would clearly drop the price to zero, and that would clearly be just terrible."

Decentralized Finance (DeFi) and Smart Contract Code Risk

"I'm definitely watching the whole DeFi space with interest and fascination... 

[On Twitter] Someone was trying to say something like 'Why doesn't pretty much everyone just take their money out of their bank accounts and put it into Dai earning interesting on Compound because that pays better rates, why would you just not get a free 3%?'. And I am like 'Excuse me, free? Are you really that confident that that contract has less than a 3% chance a year of having a bug in it?'. I mean, I honestly don't know how to measure the chances of those contracts having bugs in them, but there's definitely far too many people that round those risks to zero."

If Vitalik Had a Time Machine, What Advice He Would Give Satoshi

"github.com/ethereum/eth2.0-specs"... 

When Laura asked Vitalik if he was really serious about telling Satoshi to build Ethereum 2.0, he answered: "I do think it's a good architecture!" 

He then went on to elaborate:

"First of all, Satoshi had a really hard job because he just could not have predicted which way the ecosystem would have gone... I think on a technical level, suggesting a path that opens the door to upgradeability, to proof-of-stake, to more powerful virtual machines..."

What Vitalik Thinks Will Be the First Mainstream Use Case for Cryptocurrency

"Things I am near term optimistic about include first of all, the decentralized finance space... second of all, gaming [as in videogames]... on the non-financial side, identity, credentials, key revocation, and all of those things... fourth is parametric insurance... this is insurance that [for example] says if some extreme weather event happens, then pay me $500."