A vote currently taking place on ethereum’s mining rewards has motivated a big response from its community, despite the fact that its results are non-binding.
Described simply as a ‘show of preference’ by organizers, the vote is designed to indicate support for Ethereum Improvement Proposal (EIP) #186 – a change that, if implemented, would reduce the reward allocated to miners from the current level of 5 ethers per block to a lower figure.
According to the proposal’s abstract:
“A reduction in the issuance of ether is very likely to be price-supportive and lead to increasing investments in the platform and to help ward off speculative attacks on the value of ether by promoters of competing platforms who offer, or plan to offer, reduced token inflation rates.”
Besides the financial aspect, the proposal is also linked to the coming ‘ice age’, hard-coded into the technology.
At this point, ethereum is set to incentivize its transition from ‘proof-of-work’ (PoW) to ‘proof-of-stake’ (PoS) consensus at which time an exponential rise in block difficulty will make blocks virtually impossible to solve by PoW.
Price shift
In a conversation with CoinDesk, Matthew Light, software developer and author of EIP186, explained more of the logic behind his proposal.
Though it’s now receiving attention due to the vote currently underway, Light pointed out that the first version of the proposal appeared in December 2016, when ether was trading at a much lower value: around the $7–$8 dollar mark.
Since the low market value of ether equated to fewer funds for ethereum developers, Light said that original perception was that the ethereum project as a whole was being undervalued.
“At that time, I felt that it would be advantageous for everyone for the technology to be priced higher, and that reducing issuance would benefit that … But price has increased tremendously since then, so making it go up is no longer a critical issue,” Light said.
Raising the value of ether wouldn’t be the only result of a decrease in the block rewards, however.
The developer cited a recent Medium post from Vlad Zamfir, a core researcher at the ethereum foundation and architect of the forthcoming proof-of-stake system. In the post, Zamfir argues that over-incentivizing mining with high rewards attracts miners who are less concerned with good governance of the ecosystem as a whole.
Zamfir writes:
“When miners become more powerful, everyone else gets less of a say.”
The issue of governance is also at question in how the EIP itself is treated, coming as it does from a relatively unknown developer in the community, but having won widespread support.
“I actually don’t think the most important thing is to pass this EIP right now,” said Light. “What I think is more interesting is to see how the Ethereum Foundation will deal with it.”
Ether dilution
Although Light doesn’t consider the reward decrease a pressing change just yet, others think differently.
The current vote on the EIP is being held via carbonvote.com, which allows ethereum users to vote with ether tokens. The platform was originally set up for the community to vote on whether to rewrite the blockchain’s transaction history in the aftermath of the DAO hack.
On the table is the motion: “The ice age should not be extended without at least some decrease in block rewards.” Thus far, the tally is overwhelmingly favoring a range of affirmative responses.
Vote tallies on carbonvote.com at the time of writingSupport for the motion – in which holders of ether get votes in proportion to the size of their holdings – is due to the fact that the coming ‘ice age’ will most likely be postponed due to non-completion of the PoS system by the necessary deadline.
Ether holders had anticipated that new ether would be mined more slowly after the ice age, increasing the value of coins already in existence.
Postponement of the transition, however, would mean a continuation of existing rates of mining, leading to an unforeseen increase in supply and dilution of the value of held coins – hence the motion to reduce the rate at which miners receive ether rewards if the ice age is delayed.
As well as benefitting holders of ether, Light believes that adoption of the proposal would also lead to a more carefully considered transition to proof of stake, since there would no longer be a financial incentive to keep to schedule.
He said:
“If there’s a reduction in issuance, there’s a lot less pressure from the community to get proof of stake released before perhaps it’s ready.”
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