Blockchain Protocol Upgrades; The Why And What It Entails

On the 15th of September 2022. Ethereum launched its long-awaited upgrade called the merge, a critical stage amongst the five developmental phases of Ethereum towards a much scalable network. About a week after that, the Cardano network successfully integrated the first phase of its vasil hard fork upgrade, with the final stage in the works to be fully active by the end of September.

The conversation around the global adoption of blockchain technology is a recurring one. Not only do new protocols emerge on a daily, but existing blockchain networks are constantly working to improve their systems and make user experiences as seamless as possible. This improvement we see with these existing systems will determine whether there will still be conversations around blockchain technology in decades to come.

Following the recent news about several blockchain upgrades in the crypto landscape, here is an article discussing the why of blockchain protocol upgrades and what they entail.

The Rudiments Of Blockchain Upgrades

Although blockchain technology was first proposed as research as far back as 1991, the first practical application, Bitcoin, didn't come into existence until 2009. The blockchain ecosystem is over a decade old, but scalability issues have been a significant setback for most networks since its inception.

Many blockchain networks have developed decentralization and security and have shown the capacity to compete fairly with centralized networks in that regard. However, the critical obstacle for top decentralized systems today remains scaling.

Layer-2 scaling solutions are a popular method that most networks use to enhance a blockchain protocol's scalability and efficiency. A popular layer-2 scaling solution is the polygon network on the Ethereum blockchain. However, these scaling solutions have their purposes and can only do so much to offload the work on the main net.

They work as an external network to facilitate transactions outside the main chain without affecting the layer 1 blockchain. And this brings us to the primary method of increasing scalability. Blockchain upgrades provide solutions to various complex issues brought on by the decentralized structure of the main chain, increasing the network's throughput and enhancing scalability.

Blockchain Fork

When there's a change or alteration in a blockchain's underlying protocol, the system experiences a phenomenon termed the blockchain fork. A fork occurs every time a system moves to modify the blockchain's protocol or there is a fundamental change in how the system operates. When this occurs, the chain divides, creating a second blockchain operating slightly differently but with the same history as the original chain. There are two categories of forks in a blockchain system: the hard and the soft.

Soft Fork

The soft fork is more like a newer version of a blockchain upgrade where the changes become the new set of standards for the system as long as all the users and members of the community accept it. Cryptocurrencies use the soft fork to introduce new features and functions. Bitcoin and Ethereum are two cryptocurrencies that have done this in the past, and the adjustments made mostly work with the pre-fork blocks because the final product is accepted on a single blockchain.

Hard Fork

In the case of the Ethereum merge, the change from its proof-of-work(PoS) to the proof-of-stake(PoS) consensus mechanism is a practical example of a hard fork. While the network gradually migrates to the PoS, some miners who validate transactions on the PoW network plan to keep the old network running.

In the long run, it gets challenging for such users who choose to hold on to the Ethereum PoW post-merge because they will not be able to continue mining. With a percentage of the community choosing to remain on the PoW mechanism, the consensus is divided, and a hard fork is a solution.

Many blockchain networks have experienced a hard fork in the past. Ethereum itself was hard forked in 2016, leading to the creation of the Ethereum Classic(ETC) alongside the Ethereum blockchain(ETH). Ethereum could once again undergo a hard fork. After The Merge, the blockchains that keep the original PoW consensus method may be forked in addition to the Ethereum blockchain (ETH), which has now been switched to the PoS consensus mechanism.

Lastly

Ultimately, the point of every upgrade is to significantly solve the problems and challenges presented by the blockchain trilemma. Providing a much scalable system for users while retaining its decentralization and security. Finding a good balance has always been the aim, and an upgrade is a step to finding that balance.