Ethereum Difficulty Bomb: All Smoke, No Sparks?

At some point in the future (perhaps later this year, but the timing is currently undetermined), Ethereum may switch from its proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS) system called Casper (which developers are still working on).

This switch may sound like a minor change to those who don’t know much, but in fact the change in this parameter will have a huge impact. When the protocol change occurs, the Ethereum blockchain will hard fork, which means that in the short term, two networks - the new and the old - will exist at the same time.

At this point, the Ethereum team must convince the majority of users to upgrade to the new PoS blockchain. Otherwise, Ethereum will face the risk of creating another blockchain, just like the last hard fork that created ETC.

On the surface, getting companies using the Ethereum network to switch over wouldn’t be a problem. After all, PoS is faster, more scalable, and consumes less energy than PoW.

For the vast majority of people in the Ethereum community, Casper sounds like a pretty good deal. Unless, of course, you’re an Ethereum miner.

That’s because PoS doesn’t rely on mining. Instead, it puts the task of creating blocks on the shoulders of those who hold a stake in the blockchain — a move that essentially puts miners out of work.

Time Bomb

However, there are two things that could go wrong during Ethereum’s “big switch”.

The first is if Casper doesn’t work as planned. In this case, Ethereum will have to delay the switch. The second is if miners continue to mine the old chain. However, Ethereum has always had a plan for this - the so-called “difficulty bomb”.

The difficulty bomb was created shortly after the Ethereum network was created to make mining more difficult over time. Initially, the slowing effect was gradual, but when Casper was introduced, the difficulty of mining skyrocketed. When mining becomes more expensive, miners can't generate as many blocks. Block times become longer, which results in lower returns for miners. Eventually, the network becomes less useful.

At least that was the plan.

Miner Problem

However, miners don’t seem to care too much.

Jonathan Toomim, co-founder of cloud mining company Toomim Brothers, which has a high percentage of its investment in Ethereum, told CoinDesk that the difficulty bomb is currently affecting their purchasing decisions. All the hardware they purchased must be recovered before Ethereum is updated to Casper.

Toomim also noted that if Ethereum mining becomes unprofitable, he will switch to mining other coins such as Zcash or ETC, which have similar mining mechanisms.

However, this may be a problem for Ethereum.

If a large number of miners leave Ethereum before the switch to PoS, this could affect the security of the main Ethereum blockchain, which is still used by a large number of users.

Toomim also made it clear that he plans to mine altruistically, saying:

“As long as the survival of Ethereum is not threatened after the PoS switch, we will switch to mining a more profitable coin. That is, assuming the hard fork goes as planned and the switch to PoS is successful, or in the worst case the difficulty bomb is delayed, we will mine other coins.”

Ice Age

The Ethereum difficulty algorithm began with a core commit in the “Frontier” patch in August 2015 (the first version released by the Ethereum network).

At the time, Ethereum’s then COO Stephan Taul wrote in a blog post that starting with block 200,000, mining would become increasingly difficult, so by the end of 2016, Ethereum mining would enter an “ice age,” when the network would freeze.

But less than a year later, the Ice Age was delayed, in part to give Casper more development time.

Ethereum co-founder Vitalik Buterin wrote on Reddit:

“Due to the change in Ethereum’s difficulty adjustment algorithm in the last fork, this ice age is indeed coming very slowly.”

How slowly? This difficulty adjustment will happen every 1,000 blocks.

Currently, the average block time is 14 seconds, but last year, it was around 15 seconds. According to Buterin’s calculations three months ago, by mid-August this year, the block time will double to 30 seconds, and by 2025, the block time may be as high as 14 minutes.

A 30 second block time may not sound very long to some people, especially compared to Bitcoin’s 10 minute block time, but for clients running apps on the Ethereum network, it will be very annoying.

Calm attitude

However, some ethereum users say the temporary slowdown is worth it because PoS is faster.

Zack Coburn, lead developer of FirstBlood, which runs on ethereum, said he was not surprised.

He told CoinDesk:

“We are not very dependent on high frequency trading, so the short 30 second block time period is not a big problem.”

However, some others have a different view.

Casper blockchain developer Rick Dudley believes that any change to block time is a big deal. If block time climbs to 2 minutes, the difficulty bomb will seriously affect businesses.

"Yeah, I think it's pretty serious. Going from 15 seconds to two minutes is extremely painful. I think it's very easy to misunderstand how bad it is."

However, he noted that the difficulty bomb will only explode if there is already a viable alternative: PoS.

At this point, Dudley said he feels ethereum will have no problem convincing users to upgrade.

He concluded:

“If you were given a choice between a PoS network with lower block times and one with higher block times, why would you choose the one with higher block times?”