The Ethereum Ice Age is coming, but there’s no need to be alarmed. Despite the ominous name, the ice age is nothing to fear, nor is the related ‘difficulty bomb’ set to blow up the network. In fact, both the difficulty bomb and the ice age are tools created by the Ethereum development team that will play a key role in implementing Ethereum’s next major development update: Ethereum 2.0.
In Part 1 of this two-part series on the future of Ethereum, we will cover everything you need to know about the Ethereum ice age and the difficulty bomb. You will learn what these development tools are, why they were created, and why they have been in the news recently.
Then, in Part 2 of this series, we will cover the major updates for Ethereum that are currently being developed, including Sharding, Plasma, and Ethereum’s long-awaited proof-of-stake (PoS) consensus algorithm: Casper. Together, these components will make up Ethereum 2.0.
But before getting into Ethereum’s long-term plans, we must first take stock of where things stand and what is required before any of those major updates can be implemented, which brings us back to the ice age.
What is the Ethereum Ice Age?
The Ethereum ice age is a planned slowdown of the Ethereum network that was first introduced in 2015. The ice age itself is a result of a ‘difficulty bomb’ set to go off at a certain stage in Ethereum’s development—the same time that Ethereum will be transitioning from its existing proof-of-work (PoW) consensus algorithm toward the Casper PoS algorithm.
Since its release in 2015, Ethereum has utilized a PoW mining algorithm, known as ETHhash. Mining is used to maintain the security of the network, (used by many cryptocurrencies including Bitcoin, Monero, and Zcash) a process that involves ‘miners’ who use powerful computers to compete with one another in a race to solve a complex computational puzzle. Whichever miner finds the solution first is given the right to add the next block to the blockchain and is rewarded with newly minted cryptocurrency.
Most cryptocurrencies, including Ethereum, are coded such that the ‘difficulty’ of the mining algorithm changes with the number of miners trying to solve the puzzles. This system makes it so that the rate at which miners find the solution to the next block (and the rate at which new tokens are issued) stays relatively constant over time—even though miners are continually investing in newer, more powerful mining hardware.
This brings us to the difficulty bomb. As suggested by the name, the bomb is a point at which the Ethereum mining difficulty will explode—becoming exponentially more difficult over a short period of time. As the mining difficulty increases, so too will the amount of time it takes to mine each block. The difficulty bomb will be so powerful that the Ethereum network in its current form will eventually grind to a halt, a state which has been dubbed the Ethereum ice age.
Why Implement a Difficulty Bomb?
Upon first read, this may sound like a disaster. Why would Ethereum’s developers want the network to freeze over?
As mentioned above, the difficulty bomb is intended to go off while Ethereum transitions from PoW mining to the Casper PoS system. This change will be so significant that it will require a hard fork of the Ethereum blockchain. Once the Casper update is released, there will functionally be two Ethereum networks: the old network, which uses PoW, and the new network, which will use PoS.
With any hard fork, cryptocurrencies run the risk that miners will not migrate over to the updated chain and will instead continue to mine the old chain. This is essentially what happened with Ethereum in 2016; the network hard forked in order to return user funds following The DAO hack, but some community members refused to migrate over to the new chain. The two chains then existed in parallel—the updated chain was called Ethereum and the old chain was called Ethereum Classic.
To avoid such a situation, Ethereum’s developers coded the difficulty bomb as a tool to persuade miners to migrate over to the PoS chain following the Serenity hard fork (which will include the full implementation of Casper). The bomb will essentially make PoW mining on the old chain so difficult that it will no longer be profitable for miners to work on.
An August 2015 development blog post by Stephen Tual, Ethereum’s then-chief commercial officer, provides additional insight into the reasoning behind the bomb:
A lot of you have been wondering how we would implement a switch from PoW to PoS in time for Serenity. This will be handled by the newly introduced difficulty adjustment scheme, which elegantly guarantees a hard-fork point in the next 16 months … it works as follows: starting from block 200,000 (very roughly 17 days from now), the difficulty will undergo an exponential increase, which will only become noticeable in about a year. At that point (just around the release of the Serenity milestone), we’ll see a significant increase in difficulty which will start pushing the block resolution time upwards.
If you were paying attention to the timeline described in the above quote, you will have noticed that we are currently way off from the schedule that the Ethereum team originally intended. Indeed, the difficulty bomb has been delayed several times over the last few years because development of Casper has taken significantly longer than expected. The bomb must coincide with the release of Casper, so each delay in Casper has also brought with it a delay in the bomb.
Recent News on the Difficulty Bomb
The difficulty bomb has been a hot topic over the last few months because the bomb was last scheduled to go off in early 2019; however, the Ethereum team has announced that the Casper update will still not be ready by that time. As a result, the bomb needs to be delayed once again in order to provide more time for the Ethereum team to finalize Casper.
Ethereum is scheduled to have a hard fork called Constantinople on October 30th. This fork will introduce a scaled-back version of PoS that will run alongside the existing PoW mining algorithm in preparation for the full version of Casper, which is currently scheduled for sometime in 2019 (assuming there are no further delays).
With Casper still not ready and the Ethereum difficulty bomb set to go off in just a few months, many in the Ethereum community have made proposals for additions to the Constantinople update that will delay the bomb and address some related issues.
A range of community proposals surfaced to address the looming difficulty bomb. On August 31, the Ethereum development team decided on proposal EIP1234, which delays the difficulty bomb for approximately 12 months, while also reducing mining rewards on Ethereum from 3 ETH per block to 2 ETH. The delay will (hopefully) give the Ethereum team enough time to finalize Casper before the bomb goes off, and the reduced mining rewards will ensure that the number of new Ether introduced into the network won’t get too out of control as a result of the reduced mining difficulty.
The mining reward reduction also brings with it significant implications for Ethereum’s rate of inflation. Unlike many other cryptocurrencies, Ethereum has no cap on the number of Ether that can be created. The lack of a cap makes Ethereum more vulnerable to inflation than many other cryptocurrencies.
Prior to the reduction in rewards coming with Constantinople, the estimated rate of inflation on Ethereum was somewhere around 7.4%. Compare this to Bitcoin’s, which is estimated to be about 4.25%. Reducing the mining rewards from 3 ETH to 2 is expected to put Ethereum’s rate of inflation significantly closer to that of other coins and bring mining rewards more in line with the value of the network.
This concludes Part 1 of our series on the future of Ethereum. You now have a firm understanding of the Ethereum ice age, the difficulty bomb, as well as the changes to inflation set to come with October’s Constantinople update.
Keep an eye out for Part 2 of this series, which will cover everything you need to know about Ethereum 2.0, including Sharding, Plasma, and Casper.