- 1 How Does Governance On Ethereum Work?
- 2 Who Is Involved In Ethereum Governance?
- 3 Ethereum Fork History
- 3.1 1). Frontier (30th July 2015)
- 3.2 2). Ice Age (8th September 2015)
- 3.3 3). Homestead (15th March 2016)
- 3.4 4). The DAO fork (20th July 2016)
- 3.5 5). Tangerine Whistle (18th October 2016)
- 3.6 6). Spurious Dragon (23rd November 2016)
- 3.7 7). Metropolis-Byzantium (16th October 2017)
- 3.8 8). Constantinople/ St Petersburg (28thFebruaryy 2019)
- 3.9 9). Istanbul (8th October 2019)
- 3.10 10) Muir Glacier (2nd January 2020)
- 3.11 11). Serenity
- 4 Who Controls Ethereum?
- 5 Conclusion
The idea of Ethereum started as a whitepaper written and published by Vitalik Buterin in which he argued that Bitcoin’s structural restrictions can be maneuvered and that real-world assets can be attached to blockchain technology.
As of 2018, Ethereum was named the second most valuable cryptocurrency barely 3 years after its launch.
With expectations of it raising beyond $5,700 by the end of 2023, we wonder who controls Ethereum.
We’ve written about Ethereum history and if it’s a good investment.
If you are new to the crypto community, you would find our beginner’s guide to cryptocurrency helpful.
How Does Governance On Ethereum Work?
In political systems, governance is carried out by elected officials who implement decisions made and represent the people. In an organizational structure, stakeholders or the board of directors decide on the future of the organization.
For systems like Ethereum, political or organizational governance structures where the power to decide and implement changes is vested in a group of people can not work. To complement its decentralization, Ethereum uses a blockchain governance structure where every participant can partake in the decision-making of the network.
Blockchain governance is of two types: on-chain governance and off-chain governance.
In on-chain governance, the proposed change is written in codes and encoded in a protocol. Stakeholders who hold the governance token are then required to vote on the blockchain. If a majority of the stakeholders vote in favor of the change, it is implemented automatically.
While on-chain governance establishes transparency and a decentralized decision-making process, it can be affected by low turnout. For instance, if 15% of the stakeholders vote on a proposed change and a majority of that 15% vote in favor of the change, it would be implemented even though 85% of the network were not involved in the voting process.
In contrast, in off-chain governance, decision-making takes place through an informal process of social discussion.
This governance is similar to politics. To make a change, an EIP is created and published to the community to review. The EIP author then tries to convince other stakeholders to support their views.
If a majority of the stakeholders approve this upgrade, technical changes would be requested and a final proposal would be presented to the core developers for implementation.
Upgrades are implemented first on testnet before being activated on Ethereum Mainnet.
What Is EIP?
EIP stands for Ethereum Improvement Proposal. It is a document that contains a concise technical specification of a new feature for Ethereum or its process. It is the unit of governance on Ethereum.
Anyone on the network can create EIPs and get other stakeholders to debate on them. Depending on the type of EIP, when approved by the majority of the stakeholders, it can result in a change in the protocol of the entire blockchain (like a change in block validity rules) or a change of the rules of a specific application running on the blockchain.
Who Is Involved In Ethereum Governance?
Ethereum stakeholders can be divided into 4 groups:
This group consists of holders of ETH (including NFTs), users of Dapps, and developers of Dapps.
2). Node Operators:
This includes people that run nodes propagating blocks and transactions and rejecting invalid transactions. They work to ensure every transaction follows the consensus rules.
These are people who add blocks to the blockchain and verify transactions.
4). Core Developers:
Do Miners/Validators Control Ethereum Governance?
The work of the miner is to add blocks to the Ethereum blockchain and earn rewards for doing so. If a new protocol is released that does not favor them ( for instance, that would lead to lower mining rewards) the miners can decide not to upgrade and continue mining on the old protocol. If a large number of miners do this, it can cause the system to split.
In reality, miners are profit-driven and are often stakeholders of a large amount of ETH. They are a group of decentralized individuals, the chances that a majority of them would perform a specific malicious action on the network at the same time is slim.
If a group of miners decides to fork the network by mining on the old version, it reduces the hashing power needed by the remaining miners on the new version to complete the puzzle and find a new block. This increases their earnings.
With increased profitability on this blockchain, new miners are more likely to join in, further increasing the chain. The network eventually cancels the blockchain with the shorter chain (in this case, the old version).
Miners do not control Ethereum. If they try to by forcing the network to split, their profit reduces. Miners follow the decision reached by a majority of the stakeholders.
Do Core Developers Control Ethereum?
In off-chain governance where new upgrades are not written in codes and executed automatically upon stakeholders’ vote, core developers are assigned to write the code of the new upgrade and implement them following the outcome of the stakeholders’ debate. There is a chance that these developers can manipulate the codes to serve their purpose.
The goal of the core developer is to ensure that the blockchain they maintain is used and that the price of the underlying asset rises. If they write a code that is disapproved, the other stakeholders can pull out of the network causing the price of its assets to drop.
Core developers serve the interest of the rest of the stakeholders.
Ethereum Fork History
A fork is a split in the network that creates two branches of the blockchain. It is caused by a change in the network protocol.
Forks can be accidental (when two miners create the blocks at the same time) or intentional.
Intentional forks are of two types: soft forks and hard forks.
Soft forks are used to add new features that do not change the blockchain rules. They are backward compatible as they do not require node upgrade to maintain consensus.
In contrast, hard forks require node upgrades to maintain consensus. Blocks and transactions that were verified using the previous blockchain protocol are considered invalid.
Ethereum has experienced both soft forks and hard forks with both of them initiated by stakeholders and requiring a majority of the network’s approval.
Here is a list of Ethereum fork history and the stakeholders’ involvement.
1). Frontier (30th July 2015)
Frontier marked the first official release of Ethereum 1.0 with a genesis block of 8893 transactions and a little over 72 million ETH that was pre-mined. The gas limit per block at this time was 5,000 gas.
5 days after the release, a system upgrade has launched that set the gas limit to a default target value of 3,141,592 gas.
2). Ice Age (8th September 2015)
Ice Age is a difficult adjustment scheme. Difficulty refers to the amount of effort required for a computer to mine the next block.
To ensure a smooth transition from proof-of-work to proof-of-stake consensus, the Ethereum community released an Ice Age fork that raised difficulty exponentially leading to a slow down of the network.
Ice Age was launched on the 200,000th block.
3). Homestead (15th March 2016)
Homestead is the second major planned version of Ethereum that included 3 EIPs:
The Homestead fork enabled users to hold and transact with ETH, enabled developers to write and deploy smart contracts, and made sure client software could cope with future protocol upgrades.
Homestead fork was executed on the 1,150,000th block.
4). The DAO fork (20th July 2016)
The DAO was an early decentralized autonomous organization crowdfunded by 11,000 investors, raising $150 million worth of ETH in 3 weeks after it was launched. The DAO was intended to be a blockchain-based cooperative that funded businesses and technologies seeking investment and reaping dividends for its stakeholders.
3 months after its launch, the DAO was hacked (as a result of a flaw in its wallet’s smart contract) with the attacker draining $60 million worth of ETH.
Being that the DAO contained 14% of all ETH in circulation at that time and the attack questioned the integrity of the blockchain that was only a year old, Ethereum co-founder Vitalik Buterin proposed a soft fork that would blacklist the attacker and prevent them from moving the stolen funds. Before the community could proceed with the soft fork, a bug was discovered in the code that made it vulnerable to attack.
The second solution proposed by Ethereum developers was a hard fork that would backdate the network’s history to before the DAO attack, reallocate the stolen ETH, and enable the investors to withdraw their funds.
After much debate on whether the fork was a controversy on the network’s immutability, the fork was implemented at the 1,920,000th block on July 20, 2016.
Not all stakeholders agreed with this decision. This resulted in two separate blockchains: Ethereum Classic (ETC) which was the blockchain that kept the pre-forked protocol and Ethereum (ETH), the blockchain which reversed the stolen ETH.
5). Tangerine Whistle (18th October 2016)
Ethereum runs on gas. Lower gas prices mean higher computational effort and make it cheaper for attackers to launch denial of service attacks that delay transactions on the Ethereum network.
To fix this issue, the Ethereum community debated and implemented the Tangerine Whistle hard fork that increased the gas price on certain operations, making them reflect computational complexity.
Tangerine Whistle fork was launched on the 2,463,000th block.
6). Spurious Dragon (23rd November 2016)
Spurious Dragon was the second hard fork designed to deal with the denial of service attacks. It was scheduled on the 2,675,000th block.
The goal of this fork was to remove empty accounts that increased the size of the blockchain. This increased the cost of denial of service attacks as the attacker would have to transfer value in and out of accounts to create them.
7). Metropolis-Byzantium (16th October 2017)
Byzantium is the first stage of the Ethereum metropolis update launched on 16th October 2017. It contains 9 EIPs:
8). Constantinople/ St Petersburg (28thFebruaryy 2019)
32 hours before the fork was released, a flaw was discovered in EIP 1283 that made it vulnerable to attacks. As a result, EIP 1283 was removed and a new fork was scheduled for the 7,280,000th block as St. Petersburg.
9). Istanbul (8th October 2019)
Istanbul is the last stage of the Ethereum metropolis update. It was scheduled for the 9,069,000th block and contained 6 distinct upgrades:
EIP 1108: Reduce precompile gas cost.
EIP 1344: For easy implementation of chain ID changes.
EIP 1884: To restore the balance between the price of operation and the number of resources it requires.
EIP 2028: Reduction of transaction data gas cost.
EIP 2200: Net gas metering for SSTORE operations.
EIP 152: Improve communication between Ethereum and Zcash.
10) Muir Glacier (2nd January 2020)
Muir Glacier is an upgrade to delay the difficulty bomb (Ice Age). It was launched on the 9,200,000th block and contains EIP 2384.
Serenity (also called Ethereum 2.0) is the Ethereum community’s effort to upgrade from PoW to PoS fully. It features increased scalability and a change in gas fees while maintaining an eco-friendly validating and ETH generating environment.
Serenity’s roadmap includes Beacon chain, Berin hard fork (launched on 15th April 2021), and London fork (launched on 5th August 2021).
Who Controls Ethereum?
All stakeholders have equal control over governance. Anyone can write an EIP and promote it to get support from the rest of the network. All opinions about the proposal count.
Ethereum is a solid project that has taken the blockchain ecosystem by storm. Considering the value of the blockchain and its decentralized governance, we believe it is a worthy investment in Ethereum as it is here for the long run.
Emmanuella Elenbalu is the Content Manager at Coinsem. She is passionate about cryptocurrency, investment, and learning new things.