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Ethereum Developers Delay Mining Algorithm Change for Code Audit
During a public call Friday, a tentative decision on whether to implement the ethereum network’s ProgPoW update was postponed.
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Ethereum Devs Delay ASIC-Resistant PoW Algorithm Decision Until Third-Party Audit
n In a recent meeting, Ethereum core devs decided to delay the implementation of ASIC-resistant algorithm ProgPoW, pending a third-party auditn
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Ethereum Constantinople Hard Fork Scheduled for Late February Following Recent Delay
Earlier this week, the highly-anticipated Ethereum (ETH) hard fork event – dubbed Constantinople – was delayed just one day before its scheduled event time due to the discovery of a significant security vulnerability that, if it were to have been implemented, would have allowed nefarious actors to steal user’s funds.
On a conference call this Friday with Ethereum’s lead developers, it was announced that the hard fork is now scheduled to occur on, or around, February 27th on block number 7,280,000.
Security Flaws Lead to Ethereum (ETH) Constantinople Delay
Ethereum saw some decent price gains earlier this month that many analysts attributed to the Constantinople upgrade, which will reduce the new supply of ETH by 33%. Over the long run, analysts speculated that this supply reduction would lead ETH to see greater price stability and gradual gains.
Prior to the hard fork being delayed, Michael Moro, the CEO of Genesis Global Trading, spoke about the importance of the supply reduction feature, saying that it could be bullish for ETH’s price.
“Being that the inflation rate will drop by a third, it could potentially reduce selling pressure that could come from the miners’ reward,” he said.
Mati Greenspan, the senior market analyst at eToro, also spoke about the event in an email, saying that Constantinople will lead to a new version of Ethereum that is “faster, cheaper, and has 33% less inflation.”
Although the security flaw, which was discovered this past Tuesday by ChainSecurity – a smart contract security audit firm – did lead to a delay of the event, the supply reduction feature that analysts deemed as being bullish will still be implemented when the upgrade occurs next month.
Although it is hard to tell how much of Ethereum’s January price surge is directly the result of investors anticipation of Constantinople, its price did drop nearly 8% after the delay and security flaw were announced earlier this week.
Constantinople Security Flaws to Be Solved in Subsequent Hard Fork
Originally, Constantinople featured five Ethereum Improvement Proposals (EIPs) that were intended to be incorporated all at once. Now, the one EIP that contained the security flaw has been removed from the February hard fork, and will be incorporated at a later time after more thorough testing can be done.
Péter Szilágyi, an Ethereum developer, spoke about the new hard fork plan in a recent tweet, saying:
“Seems we’re going with block 7.28M for the #Ethereum Constantinople refork scheduled for the 27th of February! Will be a single fork on mainnet and a post-Constantinople-fixup fork on the testnets to get them back in line feature wise with the main network.”
As the new upgrade date nears, investors and traders trying to profit from the event will likely exercise increased caution, as it is possible that there will be further delays if more issues are discovered.
Featured image from Shutterstock.
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Ethereum Consensus Shift Could Delay Any Derivatives Products
The biggest thing on the launch pad this year is the Bakkt crypto exchange which is currently in a holding pattern while US government employees twiddle their thumbs during Trump’s shutdown. Several other contenders are hopeful about Ethereum futures but according to one crypto exchange boss they are unlikely to be seen soon.
Regulatory Concerns Mounting
According to Paul Chou, chief executive officer of LedgerX, odds of an Ethereum derivative product launching in 2019 are 50-50 at best. The company is one of several which already have Ethereum options ready to trade. But just like Bakkt it is currently in the queue waiting for the CFTC to wake up from the prolonged government shutdown.
According to The Block regulators still don’t really understand Ethereum and are waiting for a ‘request for input’ which solicits information from market participants; “The RFI seeks to understand similarities and distinctions between certain virtual currencies, including here ether and bitcoin, as well as ether-specific opportunities, challenges, and risks,”
In addition to LedgerX are ErisX and Seed CX which also have Ethereum based derivatives on offer. CBoE Global Markets, which was one of the first to get Bitcoin futures off the ground in late 2017, also has an Ethereum product but is doubtful that regulatory approval will come soon.
Former fintech adviser to the CFTC, Jeff Bandman, said “They understand what a proof of work network is like because that’s how bitcoin works, but proof of stake raises new questions. Specifically, what are the risks?” He added that once the agency has gained more knowledge on the product it could start to deliberate in the first half of 2019 … providing the government shutdown comes to an end.
The Casper update will usher in proof of stake for Ethereum and change the landscape entirely, at least in the eyes of the CFTC. The delayed Constantinople update which was due yesterday is a preliminary step for a shift from PoW to PoS for the network. Crypto attorney Nelson Rosario told The Block;
“There is a lot of uncertainty, regulators see this and they think ‘what exactly are we giving you permission to sell a futures product on’,” with one industry insider adding “Staking mimics a derivative product. If you are holding ether as a stake than you are essentially betting it will go up and if you are not you are effectively betting it will go down, at worst, or at best you don’t want it sitting on the network. If you have a future on top of that then you are adding a level of complexity that developers have not worked through,”
The shift in consensus for Ethereum has been heralded as the biggest progression for the network but from a regulatory perspective it could be another big headache.
Image from Shutterstock
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Ethereum Price Analysis: ETH Calm A Day After Constantinople Delay
- Ethereum price steady
- Constantinople fails to take off, vulnerabilities discovered
- Trading volumes low, ETH/USD may consolidation
Even though Constantinople is what Ethereum needs, this is the second time the upgrade has been put off. Luckily, ETH prices are steady against the USD. Before we recommend longs, ETH must first rally above Dec 2018 highs of 0
Ethereum Price Analysis
Fundamentals
It is official, Constantinople is off. However, how the Ethereum Foundation and other developers failed to spot a weakness allowing Chain Security, to successfully split open the underlying code and expose potentially catastrophic errors begs more questions than answers. A level deeper and did it take Smart Security five hours to run analysis and publish their findings?
“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 that would have occurred at block 7,080,000 on January 16, 2019.”
The security vulnerability circles around EIP 1283, a “Net gas metering for SSTORE without dirty maps” proposal that according to an official Ethereum explanation will “makes it cheaper to do certain things on chain, especially things that are currently “excessively” expensive.” Could it have been activated, the network would have been susceptible to a Re-entrance attack.
Candlestick Arrangement
Meanwhile, ETH is down 3.5 percent and 17.8 percent in the last week but still, candlestick formation hints of underlying demand. Because Constantinople didn’t take off, there is a renewed conviction across the market that the no-hurry approach adopted might be the right course of action. All the same, our ETH projection is bullish. But until after ETH prices race above 0, conservative traders should be on the sidelines.
Note that gains above 0 nullify the bear breakout pattern set in motion by Nov 19 bears. However, in the meantime, aggressive traders can take long positions at spot prices with stops at Jan 14 lows. After all, Fibonacci retracement rules are supportive of bulls. Note that there is a double bar bull reversal pattern bouncing off the 61.8 percent Fibonacci level of Dec 2018 high low. On the other hand, losses below 0 could trigger a spiral that may see ETH crash towards .
Technical Indicators
Volumes are drying up. Although volumes indicate demand or supply and waning, our bullish stance directs that for buyers to be in control, then there must be impressive rally thrusting prices above Jan 10 highs. Then again, this rally should be supported by high trade volumes exceeding 684k of Jan 10. It can even surpass those behind the ecstatic sell-off of Nov 20—1.5 million. Otherwise, ETH consolidation may continue.
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What Caused Ethereum to Delay Their Much-Awaited Hard Fork?
Ethereum Core developers announced on Tuesday that they would postpone their much-awaited Constantinople hard fork.
The team, which has previously settled January 16 as the official date for the Ethereum blockchain upgrade, decided to delay it after ChainSecurity found potential vulnerabilities in the code. The Switzerland-based blockchain audit firm said that Constantinople would enable “reentrancy attack,” whereby a pair of hackers can use the code to simulate a secure treasury sharing service.
[SECURITY ALERT] #Constantinople upgrade is temporarily postponed out of caution following a consensus decision by #Ethereum developers, security professionals and other community members. More information and instructions are below. https://t.co/p2znO8HGxf
— Ethereum (@ethereum) January 15, 2019
Cheaper Gas Cost Could Cause Security Issues
In retrospect, a reentrancy attack takes place when a smart contract communicates with an external Smart Contract by calling it. If the foreign entity turns out to be malicious, it may take advantage of the call function and take control of the first smart contract. The vulnerability could allow the external Smart Contract to make unexpected modifications in the host’s code. For instance, such an attacker may repeatedly withdraw Ether funds by “re-entering” at a particular line in the Code.
In the case of Constantinople, ChainSecurity blamed cheaper gas costs for fueling the possibilities of a reentrancy attack. According to the firm, two parties can jointly receive funds, decide on how to split them, and receive a payout if they agree by merely exploiting the “PaymentSharer contract” mentioned in the hard fork code.
“Before Constantinople, every storage operation would cost at least 5000 gas,” wrote Constantinople. “This far exceeded the gas stipend of 2300 sent along when calling a contract using ‘transfer’ or ‘send.’”
We are thankful to our tireless community that tests to ensure security is airtight before any release. After careful consideration, #Ethereum's #Constantinople upgrade will be postponed due to a vulnerability discovered by @chain_security.#Thirdeninghttps://t.co/INC7be2a6Q
— ConsenSys (@ConsenSys) January 15, 2019
The firm added that changing dirty storage slots after Constantinople would cost only 200 gas. An attacker could manipulate the victim contract code to be transformed into a dirty one: with support from a public function that changes the required variable.
“Afterward, by causing the vulnerable contract to call the attacker contract e.g.with themsg.sender.transfer(...)
attacker contract can use the 2300 gas stipend to manipulate the vulnerable contract’s variable successfully,” speculated ChainSecurity.
No Vulnerable Contracts So Far
ChainSecurity did a chain-wide audit of Ethereum and found that the reentrancy bug didn’t impact any smart contract yet. The Core also added that their decision to postpone the hard fork was reached following a detailed discussion with security researchers, Ethereum stakeholders, developers, node operators and other similarly essential parties of the community.
Vitalik Buterin, the co-founder of Ethereum, stressed that a little security vulnerability does not necessarily mean that the underlying code is flawed.
“If you have N protocol features, there are N2 ways they could potentially break,” he wrote on Reddit. “I would say [that] my personal takeaway from this is to be much more explicit about writing down invariants (properties guaranteed by the protocol) that we rely on so we can check against them when changing things.”
MyCrypto.com, an open-source blockchain interface, also backed Buterin’s opinion.
For example…
– A developer wrote, audited, tested and deployed a smart contract in the past
– It is not possible to exploit the smart contract
– The Constantinople update goes live
– It is now possible to exploit the smart contract, due to the changes made in EIP1283— MyCrypto.com (@MyCrypto) January 15, 2019
“The implementation of EIP1283 was sound,” the company wrote in one of its tweets. “The code is fine. The idea behind it is fine. There is not a “bug” in the code of this EIP. It does what is intended. The potential vulnerability lies at the contract level—not the EVM/opcode/EIP level.”
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Ethereum Price Analysis: ETH Stays Bullish Despite Constantinople Fork Delay
- ETH price trimmed most its recent gains and declined below the 1 support area against the US Dollar.
- There was a break below a connecting bullish trend line with support at 0 on the hourly chart of ETH/USD (data feed via Kraken).
- The pair still remains supported on the downside above the 3 and 4 levels.
Ethereum price declined against the US Dollar and bitcoin after the Constantinople hard fork was postponed. However, ETH/USD could bounce back as long as it is above 3.
Ethereum Price Analysis
Yesterday, we saw a solid upside break above 1 and 4 in ETH price against the US Dollar. The ETH/USD pair even broke the 8 resistance and later spiked above the 0 level. However, the upside move was capped by the 1-132 zone. It also represents the 50% Fib retracement level of the key drop from the 1 high to 3 low. More importantly, the drop was due to the delay announcement of the Constantinople hard fork. The market reacted to the downside and the price dropped below 4.
Sellers gained traction and pushed the price below the 61.8% Fib retracement level of the recent wave from the 6 swing low to 2 swing high. More importantly, there was a break below a connecting bullish trend line with support at 0 on the hourly chart of ETH/USD. The pair settled below the 4 level and the 100 hourly simple moving average. The current price action is bearish below the 1 pivot level and the 76.4% Fib retracement level of the recent wave. On the downside, there are a few important supports near 4 and 3.
Looking at the chart, ETH price may correct a few points, but it is likely to revisit the 3 support area before a fresh bullish wave. On the upside, a break above the 1 and 4 levels is needed for a decent upward move.
ETH Technical Indicators
Hourly MACD – The MACD for ETH/USD is currently in the bearish wave, but it’s losing momentum.
Hourly RSI – The RSI for ETH/USD is currently well below the 50 level, with a slight bearish angle.
Major Support Level – 3
Major Resistance Level – 4
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Ethereum: Analysts Believe Upcoming Constantinople Fork Will be Bullish Despite Delay
Although Ethereum is currently seeing a price drop due to its highly-anticipated Constantinople hard fork being delayed, it will still likely prove to be a positive event for the cryptocurrency’s price once the security flaws are smoothed out and it is implemented. Investors will not know until Friday when the new scheduled date for the hard fork is.
The term “hard fork” is typically seen as being a negative event for cryptocurrencies, and this is in part due to previous forks that have badly burned investors, like the recent Bitcoin Cash hard fork that split the community and led the cryptocurrency’s price to plunge.
Despite this, prominent analysts seem to agree that Constantinople may have bullish implications for Ethereum in the long run, mainly due to its network improvements and its supply reducing upgrade that will reduce the new supply of ETH by 33%.
Ethereum Hard Fork Unlikely to Burn Investors Long-Term
One of the greatest risks posed by hard forks is when they split the cryptocurrency into two versions. This can greatly impact the crypto’s price action, and it can split the community while driving fearful investors out of their positions. It is important to note that this is not the case with the upcoming Constantinople fork, which will not be splitting ETH and should offer some great benefits to the network.
Mati Greenspan, the senior market analyst at eToro, discussed the contentions hard forks can cause in a recent email, saying:
“Sometimes, when there is a disagreement among the community about the upgrade, some members will choose to keep the old version of the blockchain alive and we see a split. The most famous cases of this was when Bitcoin Cash split off of Bitcoin on August 1st 2017 and when Ethereum split with Ethereum Classic back in 2016,” he explained.
Ethereum core developer Lane Rettig spoke to Bloomberg earlier today about the upcoming fork, noting that it is one of the least eventful the network has seen in its history.
“I really can’t imagine a less contentious hard fork, to be honest… Of all the hard forks in the history of Ethereum, it’s probably the least eventful one,” Rettig said.
Now, however, the fork is seeing increased drama and scrutiny due to the recently discovered security flaw that, if it had been implemented, would have allowed nefarious actors to exploit a loophole in the coding that would have essentially allowed them to continuously withdraw innocent user’s funds.
Analysts Believe Constantinople is Bullish for ETH Price
In addition to offering some simple improvements to the network, analysts do believe that ETH investors will see benefits incurred from the hard fork, specifically due to the block rewards reduction that will reduce the supply of new Ether output, possibly offering the crypto more stable growth in the long-run.
Greenspan bullishly concluded that once the fork is completed, the markets will have a new Ethereum that is “faster, cheaper, and has 33% less inflation.”
Michael Moro, the chief executive officer of Genesis Global Trading, also spoke optimistically about the fork, specifically citing how the reduction of supply will reduce selling pressure.
“Being that the inflation rate will drop by a third, it could potentially reduce selling pressure that could come from the miners’ reward,” he explained.
Featured image from Shutterstock.
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Ethereum Devs Reach Consensus to Delay Constantinople Hard Fork Until January 2019
n Ethereum core devs have officially decided to delay a planned hard fork, dubbed Constantinople, until January 2019 at the earliestn
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