Over the last couple of weeks, the Bitcoin Cash network has recorded an increasing number of unknown mining pools who sign their coinbase transactions with the name of Satoshi Nakamoto.
Two possible scenarios
Experts believe that behind these miners may be supporters of the cryptocurrency Bitcoin SV. They might be trying to profit from BSV price increase. Experts point out that the main advantage for them is to withdraw funds from BCH to BSV. This will lower the Bitcoin Cash price and increase Bitcoin SV’s price.
According to another version, the miner’s activity may be due to an attempt to discredit blockchain Bitcoin Cash through reorganization attacks. Not so long ago the Bitcoin SV blockchain experienced a reorganization. Back then, disproportionately large block sizes caused the problem.
However, experts do not rule out the fact that the new computing power belongs to the Bitcoin Cash camp itself. They claim that it might be a security measure to protect the network from the so-called hashrate wars.
Currently, “Other mining pools” control 37% of the Bitcoin Cash network which is the largest share of the whole network. BTC.com comes second with 21,2%
Additionally, in March, ChainDD announced that 74.48% of the bitcoin network hashrate is controlled by six alternating pools, half of which are directly or indirectly controlled by the Chinese company Bitmain.
The long-awaited Constantinople network upgrade is finally here! It will happen today in block 7280000. As a result, mining rig owners will start this spring not only in the sun – after all, the cost of a block will fall from 3 to 2 ETH. Will it make the miners to move, and the network hashrate – collapse, respectively? Let’s try to understand it.
Hardfork “Constantinople” on the Ethereum Network
Let’s put theory in first. Constantinople is the name of the next Ethereum’s system update. The developers planned to update the blockchain already on January 16, but due to the vulnerabilities found in the code, they decided to postpone the hardfork. However, Constantinople is not a controversial issue – developers, stock exchanges and other community members support it. Also, you should not wait for a chain split and the appearance of new coins.
By the way, it did not stop the fraudsters/scammers. They were trying to get some HOLDers coins by promoting coins like Ethereum Nova and other scam projects. This issue was partly responded by Vitalik Buterin. On January 10, he offered to accept the Zcash terminology to start calling such “hard forks” “network updates”.
What’s new in the Ethereum network update?
Constantinople needs to integrate five proposals, also known as EIPs, to improve Ethereum. They will affect the speed and functionality of the network, its members’ costs and, of course, the reputable ones. Let’s remember them.
The component will add bit shifting instructions to Ethereum Virtual Machine (EVM). It will allow bits of binary information to move left and right. It all sounds complicated, but the point is simple. Thanks to the EIP 145, changes in smart contracts will become 10 times cheaper.
The upgrade will teach smart contracts to approve each other using only one hash. Before Constantinople, this was done by checking the entire code, which is long and expensive.
Vitalik Buterin’s proposal activates so-called state channels. Ethereum scaling will be implemented through transactions outside the chain.
The update reduces gas costs for SSTORE operations and makes transactions cheaper.
The proposal consists of two parts: the postponement of the difficulty bomb for 12 months and the reward for block reduction. The block reward will decrease from 3 to 2 ETH. The reduction will not be the first: activation of the hardfork “Byzantium” at the end of 2017 reduced the reward from 5 to 3 coins.
At the same time, Constantinople will also activate St. Petersburg. Its task is to correct previous errors in the protocol.
Why Constantinople was postponed?
The day before the update, ChainSecurity specialists found a hole in the code that allowed them to steal user funds. There was not enough time to fix the problem – so developers postponed the update to another date.
What happened with the network after Constantinople was postponed?
The update was announced a few hours before the scheduled time, so not all members of the community knew about it. Sources say that about 10 percent of the advertisers did not update the software and stayed in the wrong chain.
But the most important event here is the activation of the difficulty bomb, which Constantinople had to move. Remember – this word combination means a mechanism that gradually increases the complexity of the PoW acquisition to complete the blockchain operation. The bomb was introduced for the future transfer of Ethereum to PoS – as originally planned.
The recent record-low volumes of new coins in the network are directly related to the difficulty bomb. Moreover, the mechanism increased the block time from 14.5 to 20 seconds.
In addition, an anti-record was recorded on February 17, with 12989 coins on the day. However, during autumn, the indicator remained stable at 20,000 ETH.
The coins from block rewards became less and less, and therefore changing the Ethereum network became even more disadvantageous. However, the miners knew what was happening and gradually got off the network. Look at the hashrate changes.
Is this the end of Ethereum mining?
In other words, the situation seemed hopeless. Miner’s profits already are low, and now comes Constantinople with a reduction in its block rewards. As the reward falls from 3 to 2 ETH, everyone is expected to lose 33 percent. Does this seem logical?
In addition, for example, boys from Epool have joined a small hysteria and conducted a Twitter survey. They asked users to predict where will the 154 TH go – namely the entire Ethereum network – after the update.
Most of the tweeters voted for Ethereum Classic. 53% – it’s serious. Is everything really so bad?
No. Firstly, as correctly pointed out by Josh J White, the survey was similar to the dreams of other coin shillers to gain a significant hash rate increase on their networks.
Secondly, what is particularly important, is that the reduction in block rewards in the current circumstances will be almost unnoticeable. You should thank the difficulty bomb for that.
After yesterday’s results, the average block time is 20.9 seconds. So, 2.87 blocks per minute, 172.24 per hour, and 4133.97 per day. Let’s round the score to 4134 and multiply it by 3 reward coins for each block. We get 12402 ETH.
Now let’s make the same calculations for 14.5 seconds, which will lead to the postponement of the difficulty bomb. 4.13 blocks per minute at 248.27 per hour and 5958.6 per day. Round off to 5959 and multiply by 2 (coins) – we get 11918 coins. Excluding ankl-blocks, the reduction will be approximately 3.9%. In a global context, it can hardly reduce the networks hash rate. The result is that the situation with Ethereum mining will hardly change. The balance of power will remain, mining rigs will continue to function.
The Constantinople update will not kill Ethereum’s mining niche – compared to February – profits will still be almost the same.
If we remember what happened in November, there will be less ETH coins to produce. Taking into account the base law of demand and supply, theoretically, it is even able to increase the price of ETH, but the overall trend of the market still plays a big role.
Overall, Constantinople is not about the price of Ethereum. The update will be another step towards Ethereum 2.0 and the consensus of Proof of Stake. Also, this will obviously bring more benefit to the community and humanity rather than yet another chance to meet speculative interest a few times.
This article is done in cooperation with our Latvian media partners Kripto.Media
January 3rd marks the day when Bitcoin blockchain started working. Some refer to this day as the real birthday of Bitcoin, despite 31st of October when Satoshi Nakamoto published the Bitcoin white paper. January 3rd was the day when the first block was mined, and the first 50 Bitcoins were issued to Satoshi Nakamoto. Eventually, people started calling it “block 0”, although previous adaptors called it Block 1.
What is Bitcoin?
Ten years ago the Bitcoin white-paper, also called as “Bitcoin: A Peer-to-Peer Electronic Cash System” was first published. It was posted by an anonymous pseudonym Satoshi Nakamoto on October 31st, 2008. To this day people are still exchanging opinions on what, who or they are.
The definition says that Bitcoin is a peer-to-peer (P2P) electronic cash system, as described in the white-paper. It was first published on October 31st, 2008 by Satoshi Nakamoto. Because of blockchain technology, Bitcoin can offer a completely transparent way to transact payments. This system can entirely question the need or importance of Banks and other similar money transfer institutions. It ultimately allows sending money from one peer to another (peer-to-peer). Thus getting rid of the third-party instances such as Banks.
The coinbase, basically, is the input of a generation transaction. While regular transactions use the input section to refer to their parent transaction outputs, a generation transaction has no parent and creates new coins from nothing. The coinbase gives the possibility to contain any arbitrary data. And, interestingly enough, the Genesis Block includes a rather famous message:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.
Originally, that was a headline in The Time magazine on January 3rd, 2009. Some say that Satoshi intended this to provide proof that this is the first block. Others vary in speculations that this kind of proves that Satoshi Nakamoto was living in the United Kingdom or that the text might have a meaning about Bitcoins purpose.
An interesting fact is that these coins cannot be spent due to the Bitcoin code. So even if Satoshi once came out and wanted to claim these 50 BTC, he couldn’t. It is not entirely sure if this was done on purpose. A Redditor who goes by the nickname theymos, explained it very well:
“This is how the Bitcoin client worked when Satoshi created it: The client maintains a block database and a transaction database. When it finds that its block database is empty, it inserts the genesis block into its block database to get things started. This block includes a transaction sending 50 BTC to 1A1z…, but the client does not insert this transaction into its transaction database. So even though this transaction is part of the blockchain, if the client sees a transaction spending this 50 BTC, it won’t be able to find the 50 BTC transaction in its transaction database, and the spending transaction will be rejected. In other words, the genesis block’s transaction isn’t considered to be a “real transaction” by the original Bitcoin client.”
Since then, people supporting the Bitcoin movement and the creation of Bitcoin blockchain has sent small amounts of donations to the address. For example, today, January 3rd, 2019, at 11:10 AM UTC, the address already has received six gifts. The amounts vary, but overall they are tiny amounts. Over time, the genesis address has collected more than 16 BTC, altogether from 1492 transactions.
On January 3, 2019, 10 years after the creation of Bitcoin, BitMEX has purchased an ad placement on the cover of The Time magazine. It says “Thanks, Satoshi. We owe you one. Happy 10th birthday, Bitcoin”. Below this ad is a block hash. When opening the transaction coinbase, we see a message which reads:
The average block time in the Bitcoin blockchain is 10 minutes. Referring to this, it seems rather odd that the next block was mined only six days later. There are many speculations on why this happened. Some say that it could be that Satoshi mined the first block with a backward timestamp to match the edition by The Times. Another opinion is that Satoshi actually was mining all these six days with the same timestamp because of the block’s low hash.
Raw block data
The raw HEX version of the Genesis block looks like:
Recently we did an article on the upcoming BCH fork, which is due to happen on 15th November. Since the event has a lot of uncertainty revolving around it, we decided to contact the head of Bitcoin Cash – Roger Ver, to ask him a few questions.
We asked Roger about the third proposal by Bitcoin Unlimited, called BUIP908, which anticipates combining both – BitcoinABC (BABC) and BitcoinSV (BSV) proposals. We wanted to know why that is a third option, and whether Bitcoin Cash with Roger Ver would approve the outcome of that scenario. To which Roger replied very shortly, that Bitcoin.com is a very big fan of Bitcoin Unlimited (BU). “We have been running their software long before Bitcoin Cash was created,” he said replying to our e-mail.
This answer kind of leads to thinking that Bitcoin Cash along with Roger would approve the outcome of the third proposal by BU. However, this thought complicates the whole situation even more. That makes us think that Roger doesn’t want to work with Craig S. Wright anymore. He would much rather shake hands with BU than BSV. We wouldn’t either after receiving such an e-mail.
Next, we wanted to know what were the significant changes the BCH users are going to witness if Bitcoin ABC proposal goes through. To which Roger Ver (also, very shortly) answered that it’s the new ability to make smart contracts using Oracles. An oracle is a data feed – provided by third-party service – designed for use in smart contracts on the blockchain. This “seems like a major new use case thanks to opcode DSV,” explained Roger Ver.
So of course, we had to ask the classic question – what would be the worst case scenario for this hard fork? Roger replied very purely to this question, saying that:
“The entire thing breaking and everything going to zero is always the worst case scenario.”
That seems to be a very general answer as you could apply that to any cryptocurrency in the game. However, this is very concerning as many talks revolve around the lack of miner support for either BitcoinSV and BitcoinUnlimited.
The fact is that currently if we’re judging by the statistics of CoinDance, Bitcoin SV holds 57,1% of the Bitcoin Cashhash rate. Which is surprisingly down by 18,6% since yesterday November 12, referring to a tweet by @WhalePanda. That is a tremendous decline in just a day! Makes you think how much more can it drop before the hard fork? That means that miners are moving from BSV supported mining pools and switching to different ones. For example, yesterday in WhalePanda’s tweet Coingeek had 32.64% of hash rate, but today it only has 23,7%. That is a very significant amount of miners fleeing their mining pool. Also, the percentage of “other mining pools” have increased by almost five percent. Yesterday it was 2,78%, and today it has risen to 7%. Could this mean that miners are coming to a consensus on which chain they are willing to mine?
This BCH fork has generated much attention as it is exciting to see how it is going to escalate with so many possible outcomes.
For more information Roger Ver referred to his recent video, he did on Youtube, reading the Craig S. Wright e-mail and talking about the upcoming fork.
Thanks to Roger Ver for finding time for our questions, even though this didn’t clarify something we already knew, but led to more speculation on the possible outcome.