Ethereum Constantinople

Ethereum Constantinople is a hard fork of the Ethereum blockchain designed to lay the groundwork for huge scaling improvements.

Originally scheduled for Wednesday 16th January, Ethereum Constantinople has been delayed by developers. A vulnerability was found in the code that could have been exploited by hackers, putting funds at risk.

In a blog on Ethereum.org, the team explained: “Out of an abundance of caution, key stakeholders around the Ethereum community have determined that the best course of action will be to delay the planned Constantinople fork.”

The delay is temporary while developers work towards a solution.

What is Ethereum Constantinople?

The hard fork is part of Ethereum’s long-term scaling road map. Ethereum has long suffered congestion problems which results in high fees and slow transaction times when the network is busy.

The Ethereum team is working on several scaling projects including off-chain solutions, sharding, and, ultimately, a switch to “Proof of Stake” algorithm. Together, these changes should result in significantly higher speeds and lower costs.

However, upgrading the network while operational is like changing the engine in a moving car. The Ethereum team need to lay the technical groundwork before the big changes can happen.

That’s where Ethereum Constantinople comes in. It implements a series of maintenance upgrades that facilitate enormous scaling in the future.

What’s in the upgrade?

Ethereum Constantinople will implement five ethereum improvement proposals (EIPs).  They are as follows:

EIP 145 – Will result in a 91.4% saving in Ethereum gas costs through more efficient information processing methods. It relates to a process known as Bitwise shifting and requires the introduction of a native operation on the Ethereum Virtual Machine (EVM).

EIP 1052 – Makes it cheaper to process large smart contracts that only require a hash.  More specifically, this functionality returns the keccak256 hash of a contract’s bytecode. It improves upon the design of the EXTCODECOPY opcode.

EIP 1283 – This proposal aims to help smart contract developers by reducing gas costs related to changes made to data storage.

EIP 1014Introduces some off-chain transaction solutions to improve scaling possibilities.

EIP 1234 – Delays the “difficulty bomb” and reduces the mining reward from 3 ETH down to 2 ETH.

Of the proposals above, only the last one is considered controversial. Ethereum’s difficulty bomb is designed to make it progressively more difficult to mine Ethereum. At a certain point, it will become almost impossible, forcing the switch from “proof of work” to “proof of stake.”

The proposal exists to de-incentivize miners by not only making it more difficult to mine but by reducing the reward too.

Despite the controversial proposal, mining pools were generally on board with the upgrade. We were not expecting a contentious fork or competing chains.

Ethereum Constantinople Delayed

On Tuesday 15th January, Ethereum developers announced a delay to the upgrade. The decision involved Ethereum founder Vitalik Buterin and other prominent Ethereum developers.

A new date for the upgrade will be discussed on Friday 18th January. 

A Critical Vulnerability Discovered

A vulnerability was discovered in one of the proposals (EIP 1283) by ChainSecurity, a smart contract auditing company. 

The vulnerability would have enabled a “reentrancy attack” against smart contracts similar to the 2016 DAO hack which saw $70 million in ethereum stolen.  

A reentrancy attack means a manipulative actor could theoretically ask the smart contract to perform a specific function multiple times before the contract is executed or anyone is notified. It means an attacker could keep withdrawing money almost endlessly. 

In a detailed Medium post, Chain Security explains:

“The upcoming Constantinople Upgrade for the ethereum network introduces cheaper gas cost for certain SSTORE operations. As an unwanted side effect, this enables reentrancy attacks when using address.transfer(…) or address.send(…) in Solidity smart contracts. Previously these functions were considered reentrancy-safe, which they aren’t any longer.”

Is Ethereum at risk now?

ChainSecurity concluded that the current Ethereum blockchain is currently at risk:

“A scan of the main ethereum blockchain using the data available from eveem.org did not uncover vulnerable smart contracts.”

At the time of writing, the Ethereum Constantinople upgrade is delayed with a new launch date to be discussed on January 18th.

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People love to compare the bitcoin crash to the dot-com bubble.

I get it. It makes a good headline. At the end of 2018, Bloomberg, CNBC, and Fortune were quick to print stories like this:

The Crypto Crash of 2018 Is Now Worse Than the Dotcom Bust

Crypto’s 80% Plunge Is Now Worse Than the Dot-Com Crash

Bitcoin is unfolding like the dot-com crash, just 15 times faster

If you look at bitcoin’s run-up in 2017, it does look worse than the dot-com bubble.

bitcoin vs dot com bubble chart
Source: WSJ

But these charts ignore one crucial thing:

The dot-com bubble was EIGHT times bigger than crypto

We’ll start with market capitalization.

The market cap of the NASDAQ Composite Index (which tracks tech stocks) during the peak of the dot-com boom was $6.7 trillion.

The crypto market cap at its peak was $828 billion.

In other words, the dot-com bubble was eight times bigger than crypto.

crypto market cap vs nasdaq market cap

The absence of Wall Street

The second big difference between the dot-com bubble and the crypto bubble is a complete absence of institutional traders.

Almost no-one on Wall Street was trading bitcoin in 2017. Most family investment offices and hedge funds didn’t hold crypto either.

Whether it’s a good thing or a bad thing, the “big money” hasn’t come to crypto yet. The two bubbles are completely incomparable when the investor base is so widely different.

Bitcoin was a bubble…

Don’t get me wrong. The bitcoin spike in 2017 was a bubble. A big one.

It had all the hallmarks of a big financial bubble: mania, greed, delusion, and capitulation. And the 80% drop is painful.

But if we’re going to put this in context with historic bubbles, let’s use a relative scale, not percentage drops. 

Bitcoin’s “dot-com moment” may yet be still to come

Bitcoin’s “dot-com moment” won’t happen until we see much bigger volumes of money flowing into it.

This infrastructure is building… Nasdaq and NYSE are launching on-ramps for crypto. A bitcoin ETF may be on the horizon. Institutional-grade custody is coming.

Only when these things are in place will we see the kind of money required for a “dot-com” level run-up.

And if that happens, the fall will be truly enormous when it bursts.

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Ethereum hard fork constantinople

Ethereum will execute a hard fork this week named “Constantinople.” It is the first major Ethereum update of 2019.

The hard fork will take place at block number 7,080,000, expected on Wednesday 16th January.

So, what is Ethereum Constantinople? What upgrades will it bring? And do you need to do anything with your ethereum funds?

What is Ethereum Constantinople?

In simple terms, the Constantinople lays the technical groundwork for huge scaling plans in the future. 

Ethereum has a long roadmap, stretching into 2025, that aims to address congestion problems on the blockchain (the network almost ground to a halt at the end of 2017 when users flooded the system).

The Constantinople upgrade is the first step towards larger scaling ambitions. One independent developer referred to it as a “maintenance and optimization upgrade.” In other words, end-users shouldn’t notice too much difference.

Background reading: What is a hard fork in cryptocurrency?

Is it a contentious hard fork?

Hard forks are considered “contentious” when the community disagrees on the proposals. When that happens, there’s a risk that two competing chains emerge simultaneously.

We saw this happen with the Bitcoin Cash hard fork in November. Ethereum had its own contentious hard fork in 2016 when the community disagreed on how to deal with a hack. This hard fork spawned Ethereum Classic.

Constantinople, however, is not expected to be a contentious hard fork.

There is relatively strong support from miners across the board. The vast majority are expected to upgrade their nodes, and we won’t see two competing chains.

What upgrades will it bring?

The upgrade will implement five ethereum improvement proposals (EIPs).  They are as follows:

EIP 145 – Will result in a 91.4% saving in Ethereum gas costs through more efficient information processing methods. It relates to a process known as Bitwise shifting and requires the introduction of a native operation on the Ethereum Virtual Machine (EVM).

EIP 1052 – Makes it cheaper to process large smart contracts that only require a hash.  More specifically, this functionality returns the keccak256 hash of a contract’s bytecode. It improves upon the design of the EXTCODECOPY opcode.

EIP 1283 – This proposal aims to help smart contract developers by reducing gas costs related to changes made to data storage.

EIP 1014Introduces some off-chain transaction solutions to improve scaling possibilities.

EIP 1234 – Delays the “difficulty bomb” and reduces the mining reward from 3 ETH down to 2 ETH.

What is the difficulty bomb and why is it controversial?

The most controversial change in the proposal is the decision to delay the Ethereum difficulty bomb and reduce the mining reward.

The difficulty bomb is designed to progressively increase mining difficulty on the network. Eventually, it will become so difficult to mine Ethereum blocks, we will enter an “ice age.”

That process is designed to force miners away from Ethereum’s current “proof of work” system to “proof of stake.” Proof of stake is a more efficient algorithm that doesn’t require the vast computing power of miners.

The difficulty bomb will trigger the gradual shift towards the new algorithm by de-incentivizing miners.

The shift will also reduce the mining reward from 3 ETH to 2 ETH. It’s a somewhat controversial move as it will put economic pressure on the mining community. There’s also an argument that it will shift more power into the hands of large mining pools, which can afford to bear the economic costs in the short term.

Although some miners aren’t happy with the proposal, mining pools have indicated their broad support for the upgrade.

If you hold Ethereum…

… You won’t need to do anything with your funds. The hard fork should execute seamlessly and you’re unlikely to notice any difference or disruption.

Further reading: What is Ethereum? Absolutely Everything You Need To Know (A Beginner’s Guide)

Crypto bart pattern

Every Friday, we take a light-hearted tour through the best memes, artwork, and oddities from the cryptoverse. After another sudden drop in the market, Carty Sewill explorers a meme that pops up all over trading charts: The Bart Pattern.

If you’re like me, staring at the BitMEX chart at 1:00 am on a Thursday, you probably knew it was coming. A classic setup and typical execution. A big green stick followed by a red one a day or even a few hours later. Some of you know it as a ‘pump and dump,’ but veteran traders know it by its true name “The Bart Pattern.” A meme so literal, named after the top of Bart Simpson’s head, it’s uncanny. 

crypto meme bart pattern
Figure 1. The Classic Bart Pattern.

But that’s what happens when everyone’s leveraged and the whales decide to have some fun. Profiting while the rest of us “have a cow, man.” It’s no secret. And, furthermore, it’s no surprise so many in the BitMEX trollbox claim to trade based on ‘Bart Pattern Analysis.’ Longing Inverse Bart patterns and shorting the classic Bart. A sort of meta Technical Analysis if you will.

bart pattern inverse
Figure 2. Classic Double-Bart Reversal. (An inverse Bart followed by a Classic Bart.)

It’s hard to pin down exactly when the Bart pattern appeared as a Technical Analysis meme in the crypto-sphere but if I was to hazard to guess, its origins lie somewhere deep in the BitMEX trollbox sometime around the end of February 2018. As Bitcoin began to settle under $10K. When the action slowed, the manipulation flowed, and the whales were forced to keep themselves entertained.

Soon, Barts began appearing on 4chan’s /biz/; as with any good crypto-meme. Some decrying latent manipulation while others boasting of their TA prowess in identifying an ‘obvious Bart.’ All with an image of the same lovable, menacing, iconic yellow-faced dude’s hair sitting under the Bitcoin chart. In no time, Bizonacci was making light and posting videos. Even going so far as identifying ‘Marges’ and ‘Lisas’ on the 1m chart. 

Today it’s a regular sight and topic of discussion on TradingView. And not without merit. Veteran and newbie traders alike yielded to the power of the Bart pattern. Bears and bulls both living in fear of the instant liquidation of the first and last stick while smart traders set stop losses and call for Bart Simpson to make a cameo.

bart pattern tradingview
Figure 4. The Bart Pattern being discussed on TradingView.

I’ve even tried to play a few myself. Though, with little success. But like many before me I’ll keep taking my chances and, hopefully, one day call a Bart like a boss. 

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crypto layoffs erik voorhees shapeshift

Edit: This list of crypto layoffs was updated on January 14th to include the latest restructures.

Crypto Winter has hit hard. The sharp downturn in cryptocurrency prices has forced blockchain companies to take drastic measures to ensure their sustainability. Late in 2018, crypto startups began to announce layoffs and restructures, including some of the biggest names in blockchain. Here’s what we know so far:

ShapeShift (third of staff)

Crypto exchange ShapeShift is the latest to announce layoffs which will hit 37 employees – a third of its staff.

In a passionate and honest Medium post, CEO Erik Voorhees said: “It’s a deep and painful reduction, mirrored across many crypto companies in this latest bear market cycle.”

Like many blockchain companies, ShapeShift’s balance sheet is comprised of cryptocurrencies, leaving them significantly exposed during the downturn. After rapid growth of 3,000% in 2017, ShapeShift expanded to include market tracker coincap.io and hardware wallet KeepKey. Voorhees cites a lack of focus on the recent decision to downsize: “they were pulling our attention in too many directions.”

Voorhees ended his statement with an apology to his former employees: “I am sorry this happened. Your confusion, your sadness, your anger… all of it is understandable, and I am sorry to put you through it. Your contributions — of effort, of personality, of experience — remain part of our fabric.”

ConsenSys (up to 60% of staff)

ConsenSys is a startup incubator for Ethereum projects. CEO Joseph Lubin was a co-founder of Ethereum and since moved on to foster Ethereum startups.

However, ConsenSys is now re-evaluating its future. Initial reports emerged in December that ConsenSys would lay off 13% of staff. However, further rumors point to a much larger restructure involving the layoffs of 50-60% of its workforce.

In a statement, Lubin said: “Our first step in this direction has been a difficult one: we are streamlining several parts of the business including ConsenSys Solutions, spokes, and hub services, leading to a 13% reduction of mesh members.”

In its bid to fund the next generation of Ethereum projects, ConsenSys reported burn rate was $100 million.

Bitmain (up to half of all staff)

Bitmain is the biggest name in cryptocurrency mining. The company has even filed an initial public offering (IPO) to list itself on the Hong Kong stock exchange.

However, crypto winter has hit Bitmain hard. It closed its research and development arm in Israel late last year. Rumors then began to circulate that half of all staff were at risk.

The rumors spread to social media network MaiMai (China’s version of LinkedIn) to which a verified Bitmain employee wrote: “It’s affirmative. The layoff will start next week and involves more than 50 percent of the entire Bitmain’s headcount.”

The layoffs are reportedly in Bitmain’s non-core departments such as artificial intelligence.

Steemit (70% of staff)

Steemit is a blockchain-based social media and blogging platform. Similar to Medium, but contributors are paid in cryptocurrency for their writing.

The platform laid off 70% of staff in 2018. Founder and CEO Ned Scott cited “the weakness of the cryptocurrency market, the fiat returns on our automated selling of STEEM diminishing, and the growing costs of running full Steem nodes” for the decision.

He also explained the need for sharp focus on the core product before expanding: “In order to ensure that we can continue to improve Steem, we need to first get costs under control to remain economically sustainable.”

Kraken (57 staff members)

Kraken is one of the oldest and largest cryptocurrency exchanges. It’s also considered one of the most secure. However, the exchange is not immune to falling prices and lower volume on its platform.

The company cut 57 staff members from its Halifax office in Canada in 2018. However, the company maintains it is still “aggressively hiring” in many areas of the business.

Huobi (exact figures not disclosed)

Another of the world’s largest cryptocurrency exchanges, Huobi, released a vague statement about “optimizing” its staff. Although exact figures have not been disclosed, this is widely assumed to mean broad layoffs and restructure at the company.

Coinfloor (most of its 40 employees)

London-based Coinfloor is the oldest crypto exchange in the UK. It reportedly cut most of its 40 staff members in October 2018 in response to low volume. 

CEO Obi Nwosu said “We are currently working on a business restructure to ensure that we focus on our competitive advantages in the marketplace… As part of this restructure, we are making some staff changes and redundancies.”

Spankchain (more than 50% staff)

Spankchain ran a successful ICO, launching a coin to fund an adult entertainment platform. But when the coin’s market cap dropped from $190 million to just $6 million, the company was forced to rethink. It cut its employee and freelancer base from 20 to 8. 

Blockfolio

Blockfolio, a crypto portfolio tracker, has cut staff from 41 to 37 in an effort to restructure the company. Despite a recent $11.5 million injection of funding, Blockfolio has refocused its operations, putting an affiliated venture called Datablock on the backburner.

340 UK Blockchain Companies Shut Their Doors

Sky News in the UK scoured the Companies House and Open Corporates database and discovered that 340 blockchain or cryptocurrency companies in the UK closed down in 2018.

The harsh market conditions are forcing companies in the space to rethink their strategies, refocus, and concentrate on their core business. Let’s hope we see fewer headlines like this in 2019.