Uncle blocks are a phenomenon of Ethereum’s blockchain. The uncle rate is, therefore, the rate at which Ethereum’s blockchain orphans blocks. The primary reason this occurs is due to network latency, which is a strong indication that the data size of the blocks in the blockchain is too large.
In order to understand Ethereum’s Uncle Rate, this article discusses:
- What orphaned and uncle blocks are, and why they are different.
- How and why orphaned and uncle blocks occur.
- The significance of block size and network latency.
Orphaned blocks are blocks that have been successful mined and are valid. However, they do not make it onto the main blockchain. On Ethereum’s blockchain, they are referred to blocks as “uncles.” And while Bitcoin’s orphaned blocks are abandoned, unless there is a hard fork like Bitcoin Cash, Ethereum includes the orphaned blocks as “uncle blocks.”
How is a Block Orphaned: Ethereum’s Stale Rate
Blocks are orphaned when they are in the process of being added to a blockchain and the size of the data of the block caused a network delay. This is known as “high network latency.” The “stale rate” is then the rate at which blocks are orphaned. And the stale rate of blocks on a blockchain is a consequence of network delays.
Latency is due to the high cost of mining a block, which is proportional to the size of the data within the block. Cost refers to both the energetic and monetary cost of mining for computations. To operate applications on an Ethereum platform you need to use the native currency, Ether. This is the “gas” which and the currency with which miners are rewarded. And, the larger the block, the more gas it takes to mine, and the greater the chance of latency.
Adding Blocks to the Chain
When a block is mined on the Bitcoin or Ethereum network, all the participating nodes must receive the information in the block. The reception and approval of the data of a transaction (the block of data), is time-consuming and energetically expensive, which is when issues can arise due to the time lag.
Moreover, mining is competitive, as multiple nodes are running computations to solve for the target hash. So, it is entirely possible that two miners approve the block almost simultaneously. However, only one block is approved.
The block with the greater proof-of-work is the one selected by the network. New blocks continue on from that block. This is part of the proof-of-work protocol. A block’s proof-of-work is determined by the amount of energy that was expended in approving the transaction. And, the more energy used in creating a block, the greater the proof-of-work.
In the event that there are two correct blocks, the block with the large proof-of-work is chosen and the smaller one is the orphan block. The winning block needs at least a 51% approval from the network. This is a function of the consensus mechanism of the Ethereum blockchain.
The Argument for [Computational] Difficulty
There are two basic arguments at play here which lead to the design of computationally expensive blocks in a blockchain. The first is taken from the Bitcoin model. That is, Bitcoin mining is computationally and energetically very expensive because they are large transactions and therefore large blocks data.
The Satoshi design intentionally works this way in order to maintain the security of the cryptography and to keep scarcity high so that Bitcoin retains value. This is all part of the proof-of-work model that is part of Bitcoin’s original digital currency design.
However, when an identical block is simultaneously approved, both cannot be added to the blockchain. So one block gets added, and the other is orphaned and most often worthless; so mining is a high-stakes activity.
When the same thing happens on Ethereum’s platform, orphaned blocks are called uncles. The uncle rate is then the rate at which uncles are appearing on Ethereum’s blockchain. The appearance of an uncle indicates the computational effort or gas necessary for the transaction. This causes a race between these two blocks to get added to the main blockchain.
Ether v. Bitcoin
Ethereum is built on the model of Satoshi Nakamoto’s blockchain. However, one of the aims of Ethereum is to improve upon the model and to make the blockchain more flexible for applications. And, given the increasing difficulty rate of mining Bitcoin, mining pools and instances of whales have become increasingly common.
Bitcoin’s stale rate and the large size of the blocks is something that Ethereum’s protocol strives to improve upon. Vitalik Buterin, the creator of Ethereum, believes that large block size is not necessary for a quality blockchain or digital currency. And, large block sizes increase the stale rate of blocks on a blockchain.
- Ethereum’s current protocol rewards a confirmed block with 5 ETH
- The uncle rate is consistently around 0.06 to 0.08 (or ~6.7%)
- The average gas consumed per block is around 100000 to 300000
Based on the above specks, every increase of 1 million gas for a transaction increases the probability of an uncle by ~1.86%. This is, however, an improvement from the earlier Frontier, which was closer to 3-5%.
However, Buterin does not see the size of Bitcoin’s block as a necessity of the design or function. Mining is rewarded with the blockchain’s currency. Built into the protocol is the need to maintain the accuracy of the blockchain and smaller block size. This is in order to incentivize independent mining. This is because miners only profit from the accuracy and success of adding to the blockchain. All of which consumes energy and is therefore costly.
It is possible that this is also true of Bitcoin’s incentive model because the larger the block the less chance of winning the mining reward. Likewise the larger the data the greater chance of creating an unrewarded orphaned block.
However, this is not the case with Ethereum’s uncles; uncles receive a reward is of around 3 Ether. Conversely, the production of an uncle block yields a reward of 2.625 Ether.
Ethereum rewards uncle blocks to encourage decentralized mining and solo mining. The current state of cryptocurrencies has seen a significant increase in mining costs. Given their increased popularity, the difficulty for mining has increased, which means that more energy (gas) is necessary.
By rewarding uncles, there is a lower economic loss, which means that smaller pools and individual miners can remain competitive. If mining is not accessible for individual nodes, then the decentralized system risks becoming centralized as the increase of individual costs becomes too great.
Gas Price and Block Rates
The significance of uncle blocks is that it is indicative of the state of scalability and the sustainability of a blockchain. Buterin believes that the best way to decrease the gas price is to include uncles in the design of decentralized blockchains.
One suggestion is to separately propagate each block as a “potential uncle header.” Given the available data, for every uncle block that is included, the gas price is driven down by approximately 11 shannon.
Shannon is a unit of measurement. It is more commonly referred to as a bit. Shannons are a unit of information and entropy defined by IEC 80000-13. One shannon expresses the information content of an event occurring when its probability is 1⁄2, as well as the entropy of a system with two equally probable states.
Happily, the patency rate has decreased over the lifespan of cryptocurrency, a sign that the design and scalability of cryptocurrencies can be improved.
“Given the 8 sec per megabyte impedance found by the Bitcoin Unlimited study, and the fact that each second of impedance corresponds to a 1/600 chance of losing a 12.5 BTC block reward, this suggests an equilibrium transaction fee of 0.000167 BTC per kilobyte assuming no block size limits.”
Decker and Wattenhofer made study in 2013 of Bitcoin’s orphaned rate. It concluded that the Bitcoin network had an average propagation time of a block was about 2 seconds plus another 0.08 seconds per kilobyte in the block. However, the more recent Bitcoin Unlimited study demonstrates that this rate has been reduced to ~0.008 seconds per kilobyte. The reduction of orphaned blocks is the result of improvements in transaction propagation.
Last Word on Uncle Rates
Here are a few things to take away from this article on Uncle Rates
- Uncles are valid, orphaned blocks on Ethereum’s blockchain.
- They indicate the latency rate of blocks and therefore are an indication of scalability and sustainability.
- As indicated by several studies, the orphaned rate of blocks has declined as a result of improved efficiency on the network.
- Uncle blocks are still valid blocks that do not receive the full mining reward.
- Reducing the uncle rate of blocks is a necessary correction to make in order to incentivize a decentralized network. If the cost of mining gets too prohibitive, then mining pools will be the only profitable way to run the network, and it risks becoming centralized.
- Providing uncle blocks with a proportional mining reward is part of an effort to incentivize independent mining, rather than relying on pools to mine blocks on Ethereum’s platform.
- Including uncle blocks actually increases the security of the network by supplementing the work on the main blockchain by the work done in mining uncle blocks.