A storm is approaching in the Ethereum ecosystem. In recent weeks, the blockchain network has split sharply over a proposed upgrade that could reject miners’ basic income – gas fees. In the latest development, Vitalik Buterin, the creator of the network, proposed an accelerated step towards making Ethereum a proof-of-risk network. Such a move would be the first step towards Ethereum 2.0, which will arrive one year before the scheduled update date.
At the center of the contention is the Ethereum Improvement Proposition (EIP) 1559. This EIP proposes that network users send some of the gas charges to the network itself and not to the miners. These charges would be burned mainly by reducing the supply of Ether and ultimately raising the price. Vitalik, who wrote the Ethereum whitepaper, was one of those who proposed the EIP-1559.
However, Ethereum miners do not share the same opinion. Since then, a group has organized to move their hash powers to Ethermine, a mining pool against the April 1 boost. As the CNF reported, they see it as a “show of power”.
Vitalik responds with a bold upgrade offer
Vitalik and other developers supporting the upgrade have now responded with a defensive move. In an informal document, the developers proposed a “quick consolidation” that turned the network into a proof-of-risk consensus mechanism.
Ethereum miners are trying to perform a 51% attack to stop EIP-1559.
In no time, Vitalik Buterin responded with a "quick merge" proposal to escalate the ETH 2.0 merge.
— Status (@ethstatus) March 12, 2021
“The purpose of this document is to explain a mechanism that allows a consolidation to occur quickly, with little change to either ethpow or beacon clients.”
Ethereum-based private messaging platform Signal identified the EIP-1559 opposition as a possible 51% attack. He also observed that those who opposed the upgrade are currently far exceeding the 51% hash power required to coordinate such an attack.
“While this EIP greatly benefits the Ethereum ecosystem, some miners can reverse things to protect the exorbitant block rewards by blocking the upgrade altogether,” the situation suggests.
However, in his proposal for a quick upgrade, Vitalik does not mention a possible 51% attack. Rather, he describes it as a balance attack. He stated that if they could coordinate such an attack, they would eventually lose again.
Miners can do a “balance attack” and extract multiple chains, so there are many options as to which ethpow block to include. But ultimately, as long as there is at least one honest miner, at least one block is eventually created with total Difficulty> = TRANSITION_TOTAL_DIFFICULTY.
This consolidation, if successful, will migrate Ethereum to a PoS network and leave “tweaking for a future hard fork of ETH 2.0.” As the developers noted in their unofficial documentation, “minimal consolidation will make it easier to work on these things as you no longer have to worry about joining two chains at the same time.”
What’s next for the EIP-1559?
The deadlock between developers and miners is unlikely to end anytime soon. For developers, the EIP-1559 is the only way forward as it will allow Ethereum users to trade for only cents, as opposed to the very high fees the network currently charges.
Most applications built on Ethereum already support the upgrade. There is a GitHub repo showing pro-EIP-1559 projects by Ethereum developers. It includes almost all the best DeFi projects, including Aave, Curve, Kyber, Compound, BadgerDAO, and MakerDAO. In Uniswap, the upgrade received 42% support, but the other 58% of voters abstained.
Miners are also unlikely to get efficiency. They believe the upgrade will cost them a critical source of income. Flexpool, a small mining pool, leads the opposition to the upgrade. In a long blog post, the pool described EIP-1559 as “another move towards fixing whales’ bags.”
“Instead of tipping the waiter, you just burn in front of him while laughing at him,” Flexpool explained on the proposed new base rate.
Sparkpool opposes EIP-1559. https://t.co/6pw7QNN2Ug
— SparkPool.eth (@sparkpool_eth) February 25, 2021
Flexpool has the support of the two largest Ethereum mining pools. These are Ethermine and Spark Pool. Together, they control more than 45% of the network’s hash power. F2Pool, the third largest pool with 10% hash power, is the highest profile mining pool to support upgrades.