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The Difficulty Bomb in Ethereum is often mistaken. The majority of theories are complicated and technical. This post provides a brief overview of the Ethereum Difficulty Bomb. Shawn also describes how it relates to Ethereum’s block reward reduction and the Constantinople upgrade!
On January 16th, 2019, Ethereum’s Constantinople update was published, raising the number of questions about Ethereum’s “Difficulty Bomb”
Any such theories are either far too vague or completely incorrect.
In this article, I’ll send you a quick and straightforward description of what Ethereum’s Difficulty Bomb is and why it was implemented.
Ethereum Difficulty Bomb: The Simple Explanation
The Ethereum Difficulty Bomb is essentially a tool inside Ethereum. This method enables Ethereum’s core developers to modify how challenging it is for a miner to earn a payout. Miners are rewarded each time a new block is created and added to the blockchain.
As the Ethereum Difficulty Bomb “detonate” it will become increasingly more difficult for miners to earn incentives by mining. However, why would the developers want this? Since they would finally want miners to cease mining and begin validating. Remember that Ethereum is about to move from Proof of Work to Proof of Stake. In Proof Of Stake, there is no mining. Instead, we’ll use validators.
Ethereum Difficulty Bomb: A Dis-Incentive For Miners
Even if Ethereum switches to the Proof of Stake chain, miners can continue to mine on the Proof of Work chain if they are not sufficiently incentivized. To prevent security problems (such as a fork), the developers decided to give miners a gentle “nudge” to turn to Proof Of Stake. The Difficulty Bomb on Ethereum will reduce their incentives on the Proof Of Work chain, incentivizing them to turn to the Proof Of Stake chain.
Why Was The Ethereum Difficulty Bomb Delayed
Unfortunately, there was a hiccup in the Proof Of Stake update. And the whole purpose of the Difficulty Bomb was to encourage miners to turn to Proof of Stake. As a result, the Ethereum team agreed to postpone the complexity bomb until Casper was ready.
Ethereum Inflation Rate & Difficulty Bomb
Long-term buyers, on the other hand, were not pleased with the delay. Long-term holders were anticipating the difficulty blast (and Proof of Stake). Why is this so? Since lower Block Rewards imply lower Inflation Rates. Long-term investors were expecting a very positive report. Since the citizens Difficulty Bomb was postponed, the Ethereum team agreed to have a Block Reward Reduction in the Constantinople network update!