What is the Ethereum “complexity Bomb”?
Well, it’s worth starting from the beginning.
Ethereum is a cryptocurrency that according to Coinmarketrate.com, like many others, it uses a consensus mechanism that consumes a large amount of energy and computing power, called Proof of Work.
This task is performed by so-called miners who use their equipment and access to cheap energy to receive a reward for each block mined.
For some, this may lead to centralization, as it requires large investments in some cryptocurrencies using this mechanism (for example, Bitcoin), since it allows only a small group of people or companies to do this. But in the case of Ethereum, which can be mined using GPUs, this is not such a problem.
However, this consensus algorithm does not solve the problem of Ethereum scalability, so they were looking for alternative solutions to it.
One of them is the Ethereum 2.0 update, which basically changes this consensus mechanism to a Proof of Stake mechanism.
This is where the idea of a difficulty bomb arises, which is a deliberate and sudden increase in the difficulty of mining.
This would lead to an exponential increase in the time needed to mine a new block on the Ethereum blockchain, so a few things will happen:
● Cryptocurrency miners will stop spending a lot of energy on Proof of Work if you remove the incentives.
● The activity of creating ETH will change.
● The creation of a new fork of Ethereum will be prevented.
● The nodes will be forcibly updated.
Why is this concept important?
In the world of cryptocurrencies, complexity determines how many resources are needed to mine a certain block of the blockchain.
Mining is a concept that sometimes causes confusion, but ultimately it consists in finding a string (hash) 64 characters long. Any miner who manages to solve this problem will receive a reward in the form of X amount of cryptocurrency.
The Ethereum blockchain has a function built into its code, thanks to which the complexity increases over time. The more blocks were mined, the harder and longer it takes to find the next block.
This is where the complexity bomb comes into play, which increases the time and resources needed to extract the block so much that further extraction becomes almost impossible.
This is a function of using the Proof of Stake system, which in theory should spend 99% less than the Proof of Work system. But even if this is true, the reality is that it raises some doubts about whether this new system will be sufficiently decentralized and secure.
This scenario is known as the Ethereum Ice Age. The time when Ethereum will move from Proof of Work to Proof of Stake.
If in the first mechanism miners have to compete with each other to solve the hash and earn a reward, then in the new mechanism the reward will be distributed according to the cryptocurrencies that they delegate to
In fact, the mechanism works in such a way that the owners delegate cryptocurrencies as collateral, which will allow them to randomly confirm transactions and receive rewards.
The importance of the complexity bomb is to get people to switch to this new way the system works.
Creating a bomb of increased complexity
One of the reasons why miners don’t want to switch to Proof of Stake is that it will affect their earnings and they will probably earn less or lose their income.
If the vast majority continued mining, and there were a lot of nodes running on the old blockchain, then a fork could occur.
The developers and founders of Ethereum foresaw this problem and decided to embed a tool to increase the complexity of mining, which they called the complexity pump. It is assumed that this will affect the change in the consensus mechanism and help make the transition from Ethereum 1.0 to 2.0 easier.
However, the transition to Ethereum 2.0 is a huge problem for developers who have been postponing the release of the new version, as well as a complexity bomb.
If they implemented it now, before Ethereum switches to Proof of Stake, then transactions could become slower, which would lead to a decrease in the value of the cryptocurrency for users and investors.
To date, 5 updates have been released for Ethereum, and some bugs have been fixed that push back the release date of the complexity bomb.
It is expected that when they are finally ready to make the final leap to Ethereum 2.0, the difficulty pumping feature will also be activated. Something that will no longer make sense after this period, since mining will not bring rewards, especially if the update was successful and there was no fork.