Market Reacts as Ethereum Price Surges

On October 16, the Byzantium hard fork was locked in at block 4,370,000. Consequently, the price of the Ethereum network’s native cryptocurrency Ether surged by over six percent.
Benefits of the Byzantium Hard Fork and Recent Ethereum Updates
As Mohamed Abedelmalik, the Executive Director of Columbia Blockchain Lab, explained in his recently released paper, the Byzantium hard fork is expected to provide significant improvements to the Ethereum blockchain network in terms of privacy, scalability, and smart contracts efficiency, through the integration of practical cryptographic systems such as ZK-SNARKs.

In October, the development team behind Zcash led by Zooko Wilcox demonstrated the first practical use case of ZK-SNARKs in its anonymous and privacy-focused cryptocurrency. Since then, the Ethereum Foundation, the organization which oversees the open-source development of Ethereum, has continued to build applications and solutions around the cryptographic system to improve the underlying privacy measures of the Ethereum network.

At this phase of development, the integration of ZK-SNARKs by the Ethereum development team will not be able to facilitate the settlement of completely anonymous or private transactions. But, Abedelmalik noted in his paper that the implementation of ZK-SNARKs through the Byzantium hard fork would provide the platform necessary to create anonymous transactions in the future. Abedelmalik explained:
“Four native contracts have been added that allow for certain computationally expensive operations to be executed directly on the CPU that the Ethereum virtual machine runs on. These four functions (big mod exponentiation, elliptic curve addition, elliptic curve scalar multiplication, and elliptic curve pairing) are crucial to the implementation of zk-snarks, the cryptography that will one day allow for private transactions.”

In addition to improvements on privacy measures, the Byzantium hard fork is expected to efficiently scale the Ethereum network by eliminating unnecessary information stored in transactions, similar to the way the Bitcoin Core development team’s Segregated Witness (SegWit) expanded the capacity of the Bitcoin blockchain by reducing the size of transactions.

Abedelmalik emphasized that the state tree root, a piece of data that connects one transaction to another, is removed in the Byzantium hard forks, enabling transactions to be processed in parallel.
“The state tree root, is one of the only dependencies one transaction has to other transactions in the block. By removing this dependency and adding several optional parameters, transactions can now be processed in parallel.”

Market Approves of the Hard Fork, Ethereum Price Surges

Earlier today, on October 16, upon the lock-in of the Byzantium hard fork, the price of Ether surged by over six percent, surpassing the $340 mark. Historically, hard forks have been positively adopted by the Ethereum community, because the Ethereum Foundation and its open-source development community perceives hard forks as an efficient protocol update method in contrast to soft forks.

As Ethereum co-founder Vitalik Buterin noted:
“Soft forks are a dangerous game, and they become even more dangerous if they are contentious and miners start fighting back. Strictly expanding hard forks are also a dangerous game. Miner-activated soft forks are coercive; user-activated soft forks are less coercive, though still quite coercive because of the economic pressure, and they also have their dangers. If you really want to make a contentious change, and have decided that the high social costs of doing so are worth it, just do a clean bilateral hard fork, spend some time to add some proper replay protection, and let the market sort it out.”

So far, hard forks in Ethereum have been mostly successful, apart from the DAO fork that led to the emergence of Ethereum Classic.

Analysts expect the Byzantium hard fork to provide much improved infrastructures for both developers and users, especially large-scale conglomerates working on the development of Ethereum-based applications in various consortia including the Enterprise Ethereum Alliance.