Reduce ETH issuance before proof-of-stake #186
Comments
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Delaying the bomb isn't a problem, it is currently included in parity, nor is changing issuance rules. As for a coin vote, Vitalik bomb 2.0 proposal from a few months back offered a mechanism to choose a path and kill the other fork that may be useful. |
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I would support this proposal. Ethereum is an amazing project with aims far greater than the simple monetary goals of bitcoin. But it is the digital scarcity of cryptocurrency that gives value to underlying tokens for a chain. Do not forget that ethereum already has 87M ether in existence with another 13M expected in the coming years. For ethereum to work as a cryptocurrency then ether must have value - or PoS will not work and the numerous startups with ICO's held in ether risk failure. Perception is everything and general perception is that ethereum has a loose inflationary monetary design. This isn't accurate because of course bitcoin will continue to inflate for a long time. But bitcoin has a perceived hard cap and everyone knows the mantra that 'there will only ever be 21 million bitcoins'. Ethereum has no hard emission schedule published for post-PoS or an upper limit / upper bound to inflation decided. This is surprising for the second biggest cryptocurrency asset in the space in terms of market capitalisation. Developers openly saying that ethereum is not a store of value is also extremely unhelpful in my personal opinion when trying to grow an ecosystem based at it's root upon programmable digital money. Lowering coin emission and monetary inflation to anything below 2% in the short term would improve things dramatically. Further implementing a hard cap at 100M with exponentially falling rewards until then (say over 100 years) would also be positive, especially in the context of ethereum post-POW. Even if this did not alter the actual emission schedule much - appearances are everything. |
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I agree that the reduction of issuance should be done in the near future. But, I think the issuance mechanism should be simple. The simplicity will not only reduce the risk of bug, but also make the mining reward easy to calculate. In this EIP, there are two reduction mechanism: one is the As to reduce the inflation to 3%, I prefer to change the parameters, instead of combining these two mechanism. |
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I haven't gone into the technicals, but I agree with the spirit of this proposal. I'd like to see the block subsidies based an on-chain oracle, or some other system where contracts can read them. Maybe a simple BLOCK_SUBSIDY op code would suffice. |
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Some arguments against this request (but a delay in the Ice Age is probably going to be needed).
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Exactly my thoughts! It is very dangerous! Any attempt to take away somebody's money (here the miner's) for common weal is not quite fair and very risky. Even democratic ballots is not the suitable governance model for miner's community, because the minority have strong and continuous chain of incentives to rebel and split off the coin. So, don't relay on decision. Let us relay on incentives: Pros:
Contras: |
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It would be a mistake to try to bundle this EIP into Metropolis. This EIP needs to stand on its own, and in such case, I would vote against it. Given the current Ethereum roadmap, it will not make a lot of positive difference, but it carries quite a few risks, mentioned by others, like falling hash rate, split in the community, increased confusion for the users. It is not worth it |
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reduce inflation now |
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Can you cite any sources to support your assertion that
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I suspect nearly the entire mining community is likely to be against this. Do we really want to alienate the group that maintains and secures the network when casper PoS is still a glimmer off in the future? I say no - instead, remove the ice age, leave block subsidy static, and get PoS ready. |
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@mjdillon I am not investing nearly as much as I otherwise would simply because I am not yet confident in the economics of ethereum as many parameters have yet to be defined (final token supply being one of them). I imagine I am not alone in this hesitancy - hence the effect on market cap. |
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I would like to see more discussion on this EIP. The argument that miners will reject this out of self interest is weak IMO. Mining follows profitability. If we assume constant demand, the price will increase at a rate proportional to the decrease in issuance (leaving profitability unchanged) and in my estimation there is a very high probability of demand increasing significantly. The price is extremely important for attracting developers to the ecosystem and, more importantly, incentivizing them to provide value. An increase in price pays for the time of developers who could otherwise be providing value elsewhere. I don't think the ecosystem needs this, but frankly I don't understand the resistance. This one's a no brainer to me because we're not going to see PoS this year. Package it into metropolis. |
@larspensjo & @AlexeyAkhunov gives good reasons. The main resistance is the uncertainty around the drop in hashrate security for short-term, short-sighted price gains.
Why stop at 1.5 ETH/block? How do we know that a specific hashrate is good enough? Do we calculate a dollar amount to buy hardware to 51% and collectively decide at a nr? $100m? $50? $25m? How do we know what's a good nr? You can't assume constant demand either. Don't change something that's not broken, especially if it's just a short-term thing (max 2 years, if not sooner). There's way too many uncertainties with manipulating this. Split community, uncertainty about price events, magic numbers. |
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Sounds like you are a miner..
…On 27 Feb 2017 9:15 a.m., "Simon de la Rouviere" ***@***.***> wrote:
I don't think the ecosystem needs this, but frankly I don't understand the
resistance.
@larspensjo <https://github.com/larspensjo> & @AlexeyAkhunov
<https://github.com/AlexeyAkhunov> gives good reasons.
The main resistance is the uncertainty around the drop in hashrate
security for short-term, short-sighted price gains.
Mining follows profitability
Why stop at 1.5 ETH/block? How do we know that a specific hashrate is *good
enough*? Do we calculate a dollar amount to buy hardware to 51% and
collectively decide at a nr? $100m? $50? $25m? How do we know what's a good
nr? You can't assume constant demand either.
Don't change something that's not broken, especially if it's just a
short-term thing (max 2 years, if not sooner).
There's way too many uncertainties with manipulating this. Split
community, uncertainty about price events, magic numbers.
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Been in the crypto space since 2011. Never mined a single block. ;) |
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Well asking how much hash power is enough is slightly silly because:
a) POS makes it all irrelevant.
b) hash power loosely follows price - but price is linked to supply and
demand. Presumably falling supply will be price positive. But even if not
so then
c) 51% attack is theoretical and the network is massively harder to attack
now than a year ago. Even if hash power drops significantly it remains a
non-event.
d) issuance has never predicted hash power..Nor IMO should you try and
predict hash power with issuance schedules (see bitcoin)..
In summary it's complex but reducing issuance is likely to be price
positive for existing tokens which will be beneficial for all but a cohort
of miners who are being phased out of block selection in any case.
Regards,
Peter
…On 27 Feb 2017 10:02 a.m., "Simon de la Rouviere" ***@***.***> wrote:
Sounds like you are a miner..
Been in the crypto space since 2011. Never mined a single block. ;)
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Not a given. Falling supply could lead to falling security, leading to distrust in the platform, leading to falling price. Not saying this will happen, but it could. It's not a trivial possibility at least.
Well it is a legitimate concern. Low cap altcoins have been 51% attacked. It's unlikely to happen in ETH. But then, I come back to my original question. If short-term price-gain is wanted, why stop at 1.5 ETH/block? There's no good reason just besides saying: "There should be some security, but at least we should be around Bitcoin's current issuance rate." It's not satisfactory reasoning.
This is true. Price has been the main factor. But zero issuance in PoW means a dead chain (tx fees won't save you here). Issuance is correlated to hash power.
This I don't agree with. I'm legitimately concerned with the negative impact of perception of changing monetary policy to fit short-term greed (more "immutability" trolls coming out of the woodworks), and legitimately concerned about unknown events regarding security and the changing of expectations (splitting the community).
This is true. Thus, current proposals need substantially more economic/theoretical backing to prove that we won't steer into a disaster. It's not a straight-forward decision. |
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Falling supply could lead to falling security, leading to distrust in the
platform, leading to falling price. Not saying this will happen, but it
could. It's not a trivial possibility at least.
This is a trivial edge case IMO. Which is so unlikely as to be discounted
entirely. Issuance isnt proposed to reduce to zero in any case. Did people
call for the same in bitcoin in the last two Halvings (far more severe
curtailing of supply)? If you are around since 2011 then you know the truly
resounding answer.
For me cryptocurrency is supposed to be better than fiat. We don't have to
listen to bankers justifying inflation anymore. Excessive issuance is
unnecessary inflation. Why not argue that we need more issuance to entice
in more hash power? Because issuance doesn't predict hash power, and hash
power doesn't predict price but instead follows it.
At the heart of ethereum, for all it's lofty goals, is the basic premise it
is digital scarce cash which may not be counterfeit. I'll support the
project in any case but let's keep it realistic!
Regards,
Peter
…On 27 Feb 2017 10:32, "Simon de la Rouviere" ***@***.***> wrote:
Presumably falling supply will be price positive
Not a given. Falling supply could lead to falling security, leading to
distrust in the platform, leading to falling price. Not saying this will
happen, but it could. It's not a trivial possibility at least.
51% attack is theoretical
Well it is a legitimate concern. Low cap altcoins have been 51% attacked.
It's unlikely to happen in ETH. But then, I come back to my original
question. If short-term price-gain is wanted, why stop at 1.5 ETH/block?
There's no good reason just besides saying: "There should be *some*
security, but at least we should be around Bitcoin's current issuance
rate." It's not satisfactory reasoning.
issuance has never predicted hash power
This is true. Price has been the main factor. But zero issuance in PoW
means a dead chain (tx fees won't save you here). Issuance *is*
correlated to hash power.
beneficial for all
This I don't agree with. I'm legitimately concerned with the negative
impact of perception of changing monetary policy to fit short-term greed
(more "immutability" trolls coming out of the woodworks), and legitimately
concerned about unknown events regarding security and the changing of
expectations (splitting the community).
In summary it's complex
This is true. Thus, current proposals need substantially more
economic/theoretical backing to prove that we won't steer into a disaster.
It's not a straight-forward decision.
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As I mentioned above, I don't believe hashrate will be significantly affected by this, assuming price tracks decreasing issuance. I think Bitcoin halvening events are good indicators to follow.
In my opinion, nothing about this is "short-term". Ethereum itself is only a year and a half old, so I think it's a mistake to assume it's at a stable state.
Everything is uncertain in this space. Not sure what you mean by this.
Is the current issuance not a magic number? What about the re-priced op codes? Everything is an approximation of some truth.
Okay this one I'm with you on. Agreed that we should abort if there are people in this community that are willing to leave over it. That's why I wanted to get more discussion on this. I personally don't care what r/Bitcoin or CoinTelegraph have to say about it, but I agree that it's not worth splitting the community over. I just don't think that's the case. |
Good point. No one knows what's the effective trade-off to retain the highest security. We might be underperforming. Zero issuance = dead chain. %4m inflation per block is also a dead chain. Somewhere along this line you get the most security. What is that?
... but there's my problem. How do know that?
And how do we know that Bitcoin would not have had a much higher security if it kept a constant subsidy? These are still conjectures.
Changing something like this whilst Ethereum is going to be around for decades is short-term price greed.
It is (I might be wrong and Vitalik and co based the percentage inflation on actual economic research). So it works fine for now. It might not have been the best magic number, but don't change to other magic numbers when it's not broken. Basically, all I'm saying is. There's no need to fiddle with monetary policy in the short-term. If we are, we need a lot more substantial research for why fiddling with it is a good idea. And not just conjectures. Stay with the working status quo, unless there's substantial convincing evidence otherwise. Others might require less convincing evidence, or the trade-offs are substantially more obvious to others. It's just so nebulous to me, that it feels like tinkering a car engine whilst driving and not looking at the road ahead. |
Fair enough. I totally understand the not-broke-don't-fix argument and perhaps it does apply. I personally think our flat issuance has hindered growth and will continue to do so, but maybe I'm wrong. I'll back off and leave it to others to comment. |
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@alex-miller-0 : I agree with you : At this time, ETH issuance system is not adapted...
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Fully support this proposal en route to PoS. |
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Coin vote is now underway on EIP-186: As an FYI, Carbonvote set this up on their own. I think they did a very nice job and thank them for serving the Ethereum community in this way. Please, whatever your opinion is on EIP-186, let your voice be heard by participating in the coin vote! |
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any news about coin reduction from Last Core Devs Meeting 13 ? |
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FYI
This block already passed :) |
It's roughly the issuance at the time the HF is planned.
The ice age exists explicitly for this purpose. There's no reason to add a second mechanism that does the same thing. @Danieljohnsz Reducing issuance will coincide with postponing the ice age, so will result in a restoration of difficulty to its original schedule. |
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@AndreasThom You make good points. I agree that Dollars are a suitable way to quantify expenses, historically and as future objectives. Here is a clip of the core dev meeting on the subject, if curious. Enjoy! https://www.youtube.com/watch?v=hRQg_lHEKl4&feature=youtu.be&t=41m51s |
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The world of blockchain now enjoys a large degree of resiliency and miners have a lot of options. Some miners will move on to other chains due to lack of sufficient ROI. Difficulty decreases, remaining miners will enjoy a higher ROI and are happy to stay and continue mining. We have seen it in the past, self-adjustment and habituating to new set of conditions. That's what forks did. They all worked out at the end to everyone's satisfaction more or less. Different players in the ecosystem just need to come into terms with the new set of conditions during a period of adjustment. |
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It's roughly the issuance at the time the HF is planned.
I think this is the best solution. That way, nobody can be accused of
reducing the issuance to increase the price. As long as the slope of the
ice age difficulty is low enough, it also gives the miners a chance to
predict future issuance.
fre 4 aug. 2017 kl 17:26 skrev M41 <notifications@github.com>:
… The world of blockchain now enjoys a large degree of resiliency and miners
have a lot of options. Some miners will move on to other chains due to lack
of sufficient ROI. Difficulty decreases, remaining miners will enjoy a
higher ROI and are happy to stay and continue mining. We have seen it in
the past, self-adjustment and habituating to new set of conditions. That's
what forks did. They all worked out at the end to everyone's satisfaction
or after coming into terms with it after a period of adjustment.
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@M41 That is ideal, but the difficulty isn't decreasing based on miners, it is increasing on a set schedule due to the difficulty bomb already set in place, to my understanding it won't fluctuate based on the current hashrate of the network, it will just continue to go up until we hit the ice age. Is this not the case? |
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Misplaced conversation from 669 moved to 186 per @5chdn request - @Arachnid - Wrote -
@kybarnet - Replied - You make good points Nick, it is unreasonable for Ethereum to insure unlimited number of miners are profitable. At one time, I heard the goal of supporting up to 10,000 Miners, or nodes, but that seems out the window, yes? Not sure our current number of nodes, but I think I've heard up to 35,000. Likewise, when determining the Dollars of payout, the Price of Ethereum matters. 3 ETH at $220 is Equal to 2 ETH at $330, or 5 ETH at $132 or 1 ETH at $660. The total dollar of payout is a function of ETH x Price. Thus, if the objective is to secure a fixed or approximate dollar amount, it is worthwhile to consider market factors. However, I've already done the math, and know that this argument is mute. Miners, Holders, Programmers, Users, all benefit from increased efficiency, and the more immediate and sudden, the better. No matter how large the increase in efficiency becomes, be it 3 or 2 or 1, miners will make astronomically more money than they did at 5 ETH, even at the $400 price. The only discussion currently is miners arguing to pay themselves less, but unknowingly.
Ethereum is running 24,000 Nodes Currently at $2.2 Billion. Factoring that Down to 10,000 Nodes equates to roughly $1 Billion. Thus, the justification for the unspoken objective of securing $1 Billion in payouts. Good to know :) If you were to pretend $220 represented a stable price - 5 ETH Equates to $2.2 Billion. If the issuance was reduced to 3 ETH at $220, that would be about $1 Billion, forcing a $1.2 Billion buy order upon the market, raising the miner bonuses until they were once again $2.2 Billion, long term. This adjustment takes about 2 months. @int03h - Replied -
@kybarnet - Replied - Note : His original statement had no math, and was edited after my reply. Double Note : Also, note how he "Pretends" to not understand math, again. 5,760 Blocks are created daily under standard circumstances. In his attempt to confuse people, he suggests 5,760 x 5 = 4,040 ETH daily . The actual math is 28,800 ETH issued daily. All discussions of Eth bonus realignment are under the assumption of standard conditions, or 5,760 blocks per DAY - Not 808 as they suggest... his math is just very poor, but his $6 Mil per day figure is about correct. "Flat rate of 5 ETH" . Holy Jesus man. 5 ETH at $20 = $100 , 5 ETH at $200 = $1,000. For those that are observing the discussion from the outside, the Mining Union has brigaded the Ethereum Team so intently, it is now customary and acceptable to suggest there is no dollar value to Ethereum. To the outside world, it's widely accepted to be the Market Price, or about $280 currently. However, in programmer and miner discussions, they will suggest there is NO dollar value, and claim that 5 Eth at $10 is equal to 5 Eth at $400. The absurdity of such logic baffles some people, and they find it unbelievable that the anyone could actually believe such a statement, or even condone such discussion, regarding finances and Dollars of expense.
@int03h I would be happy to continue discussing mining rewards with you for 5,000 ETH. You have a significant misunderstanding regarding the concepts of mining, and are hurting miners and Ethereum. If you value the importance of mining, I request you send me 5,000 ETH so that your false notions can be corrected, which is equivalent to about 4 hours of mining reward at 5 ETH. I hope you value mining discussions as much as I do. 2 Million blocks are created annually, so 3 ETH = 6,000,000 Eth issued to miners bonuses, per year. At $20 per ETH, that's $120 Million annually, at $400 per ETH that's $2.4 Billion annually. A miner will say these numbers are the same. |
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@cbice66 Good question. An uncle reward has been proposed here #669 (comment). I assume it will be included as part of EIP186. |
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If 649 replaces 186, then uncle reward will be updated, yes. |
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A proportional reduction in uncle rewards is included in EIP-186.
…On Mon, Aug 14, 2017 at 4:42 AM, Afri ***@***.***> wrote:
If 649 replaces 186, then uncle reward will be updated, yes.
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Thinking about it, GPU mining is so important I am surprised that AMD/NVIDIA senior executives aren't talking with coin developers. I prefer they do the work in public and use a SEC filing if needed to disclose to solve any Reg FD issues. |
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@lightuponlight This EIP seems to have been superseded and implemented by #649. Does this issue still need to remain open? If not could you close it please? |
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This pull request is referenced by #649, which has already been merged. As such, it needs to either be finalised and merged, or the dependency in the existing EIP needs to be removed. |
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I've removed the reference from 649, since this was never merged as an EIP. |
and others
Coin vote is now underway on EIP-186:
http://carbonvote.com/
As an FYI, Carbonvote set this up on their own. I think they did a very nice job and thank them for serving the Ethereum community in this way.
Please, whatever your opinion is on EIP-186, let your voice be heard by participating in the coin vote!
Modified EIP proposal with changes, followed by the original EIP proposal. These changes are based on feedback provided on Reddit and Github regarding this EIP regarding the issuance reduction schedule and minimum issuance level under proof-of-work.
Abstract
A reduction in the issuance of Ether (ETH) 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. This proposal is based on a discussion on Reddit about ETH token issuance rates that many people participated in, including Ethereum Foundation member Vitalik Buterin.
In the current version of Ethereum as deployed on the network, there is already a coded schedule of reduced issuance per time period due to the "ice age" (an increase in difficulty designed to incent the adoption of hard forks). Normally, the "ice ages" in Ethereum are postponed by hard forks and the issuance is kept at 5 ETH per block. This EIP suggests that instead, the reduction in issuance from the "ice age" be implemented in a stepwise fashion within the protocol rules on a set block number schedule and with a defined lower bound (such as the "tail emission" in Monero). The proposed block reward reduction timetable has been pushed farther into the future, and the terminal issuance level has been increased in light of discussions on Reddit and github regarding this EIP.
Motivation
There is widespread interest within in the Ethereum community to reduce the current rate of ETH issuance. Uncertainty about the future total ETH token supply is a significant factor in reducing the market value of ETH which has negative externalities on the Ethereum ecosystem, by reducing the capital available by current investors to make investments in new Ethereum-based projects and by reducing the Ethereum Foundation's funds available for spending on salaries. Reducing ETH issuance in advance of proof-of-stake would provide a measure of reassurance to investors that their holdings of ETH will be diluted to a much lower degree. It would be helpful in the cryptoplatform marketplace for Ethereum to reduce issuance given that various competing platforms have or are planning lower issuance levels, such as Ethereum Classic.
Additionally, reducing block rewards in the near future helps reduce a sense of pressure on the Ethereum network architects and developers to rush a proof-of-stake implementation and try to deliver it more quickly than would be prudent.
The terminal reward value of 2 ETH / block was chosen to reduce token supply inflation to around 4% annually, gradually reducing over time until proof-of-stake is launched. This is in line with the current Bitcoin token inflation rate of approximately 4%. In comparison, current proof-of-work ETH token inflation rate is a bit less than 13% per year.
A reduction of token emission under proof-of-work could lead to a reduction in network security. However, a plausible improvement in the exchange rate of ETH because of a reduction in issuance will lead to an increase in network security. It is unclear how much the ETH token price might increase due to a lowered issuance rate, but the positive response of Bitcoin price to issuance reductions ("halvening") is encouraging.
Specification
The current issuance level for ETH is 5 ETH per block, with various kinds of uncle rewards also provided. This EIP proposes that no change to the relationship between block rewards and uncle rewards be made, but instead that all uncle and uncle inclusion rewards be downsized proportionally with the provided block reward schedule.
The proposed reduction in issuance is an approximation for providing stepwise issuance reduction approximately matching the "ice age" coin issuance reduction already built into the current specification of the Ethereum software. Vitalik Buterin gave an estimate of this reduction on Reddit:
https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_about_the_projected_coin_supply_over/dbc66rd/
Based on the ice age blocktime lengthening data Vitalik provided, the following reduction of block reward schedule is proposed as a reduction in issuance that is smaller than the reduction already scheduled (via longer blocktimes caused by the "ice age" PoW difficulty bomb). The reduction schedule is also significantly delayed over the "ice age" reduction already contained in the code:
Block 3700000 - Block reward reduced to 4 ETH / block
Block 5000000 - Block reward reduced to 3 ETH / block
Block 7000000 - Block reward reduced to 2 ETH / block (minimum block reward until proof-of-stake)
As previously stated, all uncle rewards should be proportionally reduced along with the main block reward.
The reduction in issuance specified in this EIP should also be accompanied with a change to push back the "ice age" date into the future as best determined by the Ethereum Foundation in the context of planning for the Casper / proof-of-stake release.
In the light of discussions with members of the Ethereum community and the Ethereum Foundation, this EIP recommends a coin vote should be taken to determine the level of community support before a decision about whether to implement it.
Rationale
This design is deliberately simplified from the issuance function Vitalik used to calculate his predicted blocktime schedule with relatively few block reward amount transition changes in order to minimize implimentation difficulty across the various Ethereum clients. No change in the relationship between block and uncle rewards is made to avoid introducing unforseen game-theoretic changes in mining strategy. Minimum planned proof-of-work issuance is set to 2 ETH / block to provide a baseline level of security rewards for proof-of-work close to Bitcoin's current issuance rate until the transition to proof-of-stake.
Implementation
This EIP must be implemented in all Ethereum validating nodes by a hard fork, either in a currently-planned hard fork such as Metropolis, or in a separate hard fork.
Original EIP proposal below
Abstract
A reduction in the issuance of Ether (ETH) 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. This proposal is based on a discussion on Reddit about ETH token issuance rates that many people participated in, including Ethereum Foundation member Vitalik Buterin.
In the current version of Ethereum as deployed on the network, there is already a coded schedule of reduced issuance per time period due to the "ice age" (an increase in difficulty designed to incent the adoption of hard forks). Normally, the "ice ages" in Ethereum are postponed by hard forks and the issuance is kept at 5 ETH per block. This EIP suggests that instead, the reduction in issuance from the "ice age" be implemented in a stepwise fashion within the protocol rules on a set block number schedule and with a defined lower bound (such as the "tail emission" in Monero). The proposed block reward reduction timetables and the issuance floor are open to alternative suggestions by the Ethereum community if desired.
Motivation
There is widespread interest within in the Ethereum community to reduce the current rate of ETH issuance. Uncertainty about the future total ETH token supply is a significant factor in reducing the market value of ETH which has negative externalities on the Ethereum ecosystem, by reducing the capital available by current investors to make investments in new Ethereum-based projects and by reducing the Ethereum Foundation's funds available for spending on salaries. Reducing ETH issuance in advance of proof-of-stake would provide a measure of reassurance to investors that their holdings of ETH will be diluted to a much lower degree. It would be helpful in the cryptoplatform marketplace for Ethereum to reduce issuance given that various competing platforms have or are planning lower issuance levels, such as Ethereum Classic. If a large amount of opposition to this EIP for issuance reduction is seen in the community, this EIP could be submitted for a coin vote.
Additionally, reducing block rewards in the near future helps reduce a sense of pressure on the Ethereum network architects and developers to rush a proof-of-stake implementation and try to deliver it more quickly than would be prudent.
The terminal reward value of 1.5 ETH / block was chosen to reduce token supply inflation to around 3% annually, gradually reducing over time until proof-of-stake is launched. This is in line with but slightly less than current Bitcoin token inflation rate of approximately 4%. In comparison, current proof-of-work ETH token inflation rate is a bit less than 13% per year.
A reduction of token emission under proof-of-work could lead to a reduction in network security. However, a plausible improvement in the exchange rate of ETH because of a reduction in issuance will lead to an increase in network security. It is unclear how much the ETH token price might increase due to a lowered issuance rate, but the positive response of Bitcoin price to issuance reductions ("halvening") is encouraging.
Specification
The current issuance level for ETH is 5 ETH per block, with various kinds of uncle rewards also provided. This EIP proposes that no change to the relationship between block rewards and uncle rewards be made, but instead that all uncle and uncle inclusion rewards be downsized proportionally with the provided block reward schedule.
The proposed reduction in issuance is an approximation for providing stepwise issuance reduction approximately matching the "ice age" coin issuance reduction already built into the current specification of the Ethereum software. Vitalik Buterin gave an estimate of this reduction on Reddit:
https://www.reddit.com/r/ethereum/comments/5izcf5/lets_talk_about_the_projected_coin_supply_over/dbc66rd/
Based on the ice age blocktime lengthening data Vitalik provided, the following reduction of block reward schedule is proposed as a very rough approximation of the existing specification's reduction in issuance (via longer blocktimes caused by the "ice age" PoW difficulty bomb):
Block 3700000 - Block reward reduced to 4 ETH / block
Block 3900000 - Block reward reduced to 3 ETH / block
Block 4100000 - Block reward reduced to 2 ETH / block
Block 4150000 - Block reward reduced to 1.5 ETH / block (minimum block reward until proof-of-stake)
As previously stated, all uncle rewards should be proportionally reduced along with the main block reward.
The reduction in issuance specified in this EIP should also be accompanied with a change to push back the "ice age" date.
Rationale
This design is deliberately simplified from the issuance function Vitalik used to calculate his predicted blocktime schedule with relatively few block reward amount transition changes in order to minimize implimentation difficulty across the various Ethereum clients. No change in the relationship between block and uncle rewards is made to avoid introducing unforseen game-theoretic changes in mining strategy. Minimum issuance is set to 1.5 ETH / block to provide a baseline level of security rewards for proof-of-work close to but slightly below Bitcoin's current issuance rate until the transition to proof-of-stake.
Implementation
This EIP must be implemented in all Ethereum validating nodes by a hard fork, either in a currently-planned hard fork such as Metropolis, or in a separate hard fork.
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