Following the successful Ethereum Istanbul hard fork update, several popular exchanges have announced their official support for the network upgrade.
Yesterday, on Dec. 7, the Ethereum’s network saw ample collaboration between node operators and miners to update the software to support the Istanbul hard fork.
Some crypto exchanges even sounded their willingness to update a few days prior to the scheduled hard fork.
A widely supported hard fork
Notably, Binance announced support for the upgrade on Dec. 5 and the day afterwards its U.S. subsidiary did the same. Coinbase also tweeted yesterday that Ethereum and ERC20 deposits and withdrawals have been resumed on its trading platforms and the node upgrade has been completed.
The website dedicated to reporting the state of Ethereum support of crypto exchange Kraken also suggests that the firm has undergone scheduled maintenance to update the nodes. While the Poloniex exchange has announced their support on twitter.
Bitfinex, the cryptocurrency trading firm with close ties to stablecoin operator Tether, also announced on Dec. 6 that it planned to support the hard fork.
Overall, the hard fork has seen widespread adoption by the community and not major negative events have been reported. This hard fork also included the previously discussed Muir Glacier hard fork, meant to address the so-called Ethereum Ice Age.
Coming every Sunday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.
It’s happened! Ethereum’s much-anticipated shift to Istanbul has been completed, and the system-wide update came into force when the network passed block #9069000 late on Saturday night. Vitalik Buterin claims capacity now has the potential to reach 3,000 transactions per second. Istanbul is designed to deliver interoperability with the privacy token Zcash and make it cheaper to use zero-knowledge technologies that enhances privacy. Although miners and node operators need to update their client, most people who hold ETH or use the network are unaffected — and ETH prices are unexpected to suffer turbulence. Maxwell Foley, software engineer at CertiK, told Cointelegraph Magazine: “Ethereum, in general, is an exciting project because they’re trying the hardest out of anyone in the crypto space to scale without sacrificing decentralization.”
There’s been some new developments after 342,000 ETH was stolen from the hot wallet of major South Korean crypto exchange Upbit. According to Whale Alert, a service monitoring large transactions, one of the addresses involved in the theft has been moving ETH worth millions of dollars to an unknown wallet. Dodgy transfers have been taking place throughout the week in chunks of 10,000 ETH and 1,001 ETH — worth about $1.5 million and $150,000 respectively. After news emerged that the funds, worth about $50 million, had been stolen, some analysts suggested that an “inside job” was more likely than an external breach.
The Bank of France is going to test a central bank digital currency for financial institutions in the first quarter of 2020. Governor François Villeroy de Galhau said the “digital euro” pilot will not involve retail payments made by individuals — and stressed any such project would “be subject to special vigilance.” The central bank has been clear that France needs to assert sovereignty over private initiatives such as Facebook’s Libra, with the country leading efforts to ensure that the stablecoin is stopped from launching on European soil. The governor has also spoken of his enthusiasm for being the first country in the world to issue a CBDC, allowing France to become an example to other jurisdictions.
Given we are, er, Hodler’s Digest, let’s give you some holding news. New research has suggested that a whopping 60% of BTC in circulation hasn’t left its wallet in more than a year. This is particularly telling since BTC/USD ballooned from lows of $3,100 last December to $13,800 just six months later. Markets subsequently reversed downward — shaving 52% off their highs. Rhythm, the analyst who uploaded the statistics, didn’t mince his words by saying: “Hodlers of last resort are insane.” With the trend of dormant BTC as a percentage of total supply sharply increasing in recent years — and remaining intact during bull and bear markets alike — it seems many investors want to save it rather than spend it.
New research by Deutsche Bank has revealed what the future might look like for crypto in just 10 short years. Its report suggests that digital currencies could eventually replace cash one day, as demand for anonymity and a more decentralized means of payment grows. Hurdles do lie in the way — and the authors say digital assets will need to gain legitimacy in the eyes of governments and regulators for wider acceptance to be achieved. The report also warns that the risk of cyberattacks and digital warfare could also pose huge risks to the stability of financial systems based on digital currencies in the future.
Winners and Losers
At the end of the week, Bitcoin is at $7,602.68, Ether at $150.47 and XRP at $0.23. The total market cap is at $205,799,442,442.
The top three altcoin gainers of the week are Energi, HedgeTrade and Enjin Coin. The top three altcoin losers of the week are ILCoin, Silverway and Thunder Token.
“Free Ross, baby! Get him out. We need entrepreneurs like that guy! Get him out of jail! Why do we put these really extraordinary people in jail? We need their minds, their energy, their life force. Get him free. Who knows what else he could’ve come up with?”
“The halvening” in May 2020 — when the reward paid to miners falls from 12.5 BTC to 6.25 BTC per block — is widely regarded as an event that will catalyze a bull market. But according to Jason Williams, the co-founder of Morgan Creek Digital, these expectations might be overblown. He believes that the having will have no impact whatsoever on BTC prices, describing it as a “non-event.” With analysts bitterly divided over whether there will be a bull run — and if so, how quickly a reaction will take place — expect many more wild predictions to grace this column in the weeks and months to come.
Great North Data, a crypto mining company based in Canada, has filed for bankruptcy. The firm operated facilities in Labrador City and Happy Valley-Goose Bay. Bankruptcy documents show that it had $13.2 million in liabilities but just $3.5 million in assets. Reports suggest that the company owed six-figure sums to government bodies. It’s been a difficult time for mining companies, with Washington-based Giga Watt closing down in January because it was “insolvent and unable to pay its debts when due.”
Security researchers have uncovered cryptocurrency-related macOS malware that is believed to be the work of North Korean hackers known as the Lazarus Group. It is believed that the malware can retrieve a payload from a remote location and run it in memory — something that is not common for macOS. This resultantly means it can be difficult to detect the malware and carry out forensic analysis — with only 10 antivirus engines actually flagging it as malicious. “Clear overlaps” have also been found with malware that was detected by another group of security researchers in the middle of October.
A little news about us now, if you’ll indulge me. Cointelegraph has launched a Chinese-language version of the publication — with offices in Guangzhou, Beijing and Shanghai. The venture has been co-founded by Vadim Krekotin, Kevin Shao and Simon Li, and the team says they are determined to produce the highest-quality journalism for readers in China — ”holding steadfast to the values of editorial independence and responsibility to our readers.” Cointelegraph China is now our third base in Asia, joining local news sites serving Japan and Korea.
Bamboozled by news of Ethereum’s latest hard fork? This nifty feature from Cointelegraph Magazine explores what forks are for, the structure of Ethereum’s roadmap, and delves into the details of the changes that Istanbul has delivered.
Miner capitulation occurs in the Bitcoin market when mining is no longer profitable — and it is believed to have triggered BTC’s major drop in December 2018. Joseph Young explores the phenomenon in depth here, and looks at what might happen in the months to come.
Vitalik Buterin has claimed that Ethereum will support 3,000 transactions per second after the upcoming Istanbul fork.
Will this unleash a new wave of Ethereum creativity? Might we expect a surge in traffic on the Ethereum network? Could its increase influence the price of ETH?
Ethereum is slow
The conventional wisdom is that Ethereum is too slow. But for what purpose is it too slow? It seems to be sufficiently fast for financial services. But the mistake people are making in saying “Ethereum is slow” is misunderstanding what a great thing, counterintuitively, it is to be slow. ETH works because users want to pay (in the form of “gas”) to perform computations.
If Ethereum is congested, it means that there are more people who want to pay to have Ethereum computations than there are the capacity to allow it.
To put it in another way, let’s say that you own an Apple Store and there is an ever-growing line of customers waiting to buy the newest iPhone. The more customers you have, the more the profit. If you are having trouble accepting the amount of money people want to give you in order to use your service, you are doing well. You wouldn’t complain in that situation.
The “world computer” isn’t a thing
So, it turns out that achieving consensus over computation is very expensive — and therefore, as slow as molasses. Istanbul will make Ethereum’s consensus a bit faster, but the term “world computer” seems hyperbolic, as it suggests there could be a singular device that handles the world’s computational needs. It doesn’t even get close at 3,000 transactions per second. Ethereum’s current state is more akin to a “Trust Machine” — to borrow the name of Alex Winter’s blockchain documentary — than a “world computer.”
DApps are also not a thing
What is a “decentralized application”? It’s a mixed metaphor that is prone to confusion. The word “app” is inseparable from the rise of smartphones and naturally the rise of the “App Store.” So, as soon as you say “DApp,” you are depicting a similar world of endless possibility and creativity. This flawed reasoning is compounded by talk in the original Ethereum white paper about the creation of a Turing complete “World Computer.” This suggests that there are an infinite number of applications that are able to run on Ethereum. But since running computations under consensus comes with a cost, it will always be greater than the cost of running computations without consensus — even if the cost of consensus is greatly reduced.
Vending machines are a thing
The cost of consensus is why it makes more sense to talk about what Nick Szabo calls “Vending Machines.” If a line of code is not handling value, then why not execute it in a faster, cheaper, more centralized environment? This reduces the practical applications of storing, transmitting, buying, selling, splitting, sharing or otherwise manipulating value. This means practical applications would naturally be pragmatic value-in, value-out smart contracts like decentralized exchanges, token swaps, nonfungible token vending, token-issuance (ICO or STO) contracts, and lending and arbitrary financial products (DeFi). If we had a “World Computer” (we don’t), it might make sense to talk about DApps, but until then, what we have are vending machines.
Lending machines are also a thing
Smart contracts relating to collateralizing and lending digital assets are getting a lot of attention these days. Concerning this, ETH in particular is well positioned, as it has a relatively large liquidity pool and a very high degree of programmability. DeFi means that there are vastly diverse sets of programmable digital financial products, but at the moment, the idea of a “Lending Machine” is one that is getting the most attention. In particular, lending seems attractive because current DeFi protocols are producing up to 10% interest rates. This could be seen as a “killer app” for crypto because traditional banks have been so close to 0% interest for so long — and it’s a compelling reason for new users to come to crypto. Currently, almost $700 million in value is locked in DeFi contracts. It remains to be seen whether such high rates will hold up as more and more money floods into the market seeking high returns.
Another obvious application is gambling apps. This is a variation on the “decentralized exchange,” but instead of exchanging a predictable amount of one token for another, users essentially exchange tokens for unpredictable returns. One of the advantages of smart contract-based gambling over other forms of online gambling is that scrutinizing the smart contracts can enable players to determine if the gambling machine is “provably fair,” unlike the centralized exchanges that are only demonstrably unfair.
The need for speed
If all we are building are vending machines, lending machines and slot machines, do we really need performance? Purveyors of “decentralized exchanges” insist that once they are fast enough, they will achieve the liquidity of “centralized exchanges.” But historically, liquidity has always moved toward high frequency trading venues — and trusted computing will always confer a performance edge versus trustless.
One of the great things about the increase in performance is simply to increase the capacity of existing apps, and to enable more similar apps to run on Ethereum. But the performance increase from Ethereum Istanbul seems unlikely to produce as-yet-unseen types of applications.
Miko Matsumura is a general partner with venture capital fund gumi Cryptos Capital. He is also a co-founder of Evercoin, a wallet and exchange. He has been working in Silicon Valley for 25 years on open-source software projects, starting with the introduction of the Java programming language, for which he was the chief evangelist.
As of press time, Ethereum has passed block #9068000, putting it within 1000 blocks of the scheduled Istanbul hard fork, which should take place at around 23:30 UTC.
The much-anticipated shift to Istanbul will be the Ethereum network’s first hard fork since February’s Constantinople. Both are stages of a broader phase of ongoing development that began in 2017 called Metropolis.
What is changing?
Cointelegraph has covered Ethereum’s ongoing developments extensively, as have the developers. Broadly speaking, Istanbul should be streamlining the network in accordance with Metropolis’s overall goals of scaling the network.
Specifically, Istanbul will expand interoperability with privacy token Zcash. The upgrade will also make zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) cheaper. zk-SNARKs allow users to demonstrate knowledge without exposing that knowledge — a technology critical to Ethereum’s recent privacy enhancements.
How to prepare?
Per a Nov. 20 blog post from the Ethereum Foundation, if you hold Ether (ETH) or use the network, you probably don’t need to do anything unless you receive instructions otherwise from your exchange or wallet service.
If you are a miner or node operator, however, you will need to update your client to ensure that you are not suddenly stuck running obsolete once the hard fork takes effect.
Ethereum’s future beyond Istanbul remains unsettled. Fears of an impending Ice Age in which block hashing slows down as the network shifts from proof-of-work (PoW) to proof-of-stake (PoS) verification have led to proposals for another Muir Glacier fork to soften the impact of the transition.
Otherwise, the next planned upgrade to the Ethereum network is called Berlin and is tentatively slated for Q2, though details as to what changes Berlin is going to implement remain limited and largely speculative.
Ethereum developers have proposed a hard fork, named Muir Glacier, that should address the impending Ice Age, which could cause a significant slowdown on the Ethereum mainnet.
In an Ethereum improvement proposal at the end of November, Ethereum developer James Hancock wrote that the proposed Ethereum Muir Glacier hard fork would push back the mechanism, known as Ice Age.
Ice Age is unnecessarily complex and confusing
Ethereum’s Ice Age, also known as Difficulty Bomb, refers to the increasing hashing difficulty in the mining algorithm used to reward miners with Ether (ETH) on its blockchain. This piece of coding artificially slows down the production of blocks on Ethereum’s blockchain and therefore functions as a deterrent for miners who might choose to continue with proof of work (PoW) even after Ethereum has transitioned to proof of stake (PoS).
However, according to Hancock the existing implementation of Ice Age is unnecessarily complex and confusing to communicate to the community. He adds that any updates to the design should be able to model the effect on the network in a straightforward way that is easy to predict when it occurs. Currently, Hancock does not believe this is the case.
Hancock further points out that Ethereum’s upcoming hard fork would push back the mechanism “as far as is reasonable,” to give developers the time to decide whether to update Ice Age so that its behavior becomes predictable or to remove it entirely. He added:
“This fork would give us time to address the community to understand their priorities better as far as the intentions of the Ice Age, and give time for proposals for better mechanisms to achieve those goals.”
ETH block propagation at least twice as fast
In November, blockchain advisory and product development firm Akomba Labs conducted a test on the Ethereum network that showed it could make block propagation at least twice as fast. Test findings showed that the average block propagation performance dropped from 360 milliseconds without running BloXroute’s Blockchain Distribution Network to 172 milliseconds with it.
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