Ethereum Developers Propose to Reduce Miners’ Rewards by 75% with EIP-2878; Community Objects
- A group of Ethereum developers suggests a 75% cut in miners' rewards through EIP 2878.
- The proposed cut will see the miner’s rewards reduced from 2 ETH to 0.5 ETH in a bid to “preserve Ethereum’s purchasing power.”
- EIP 2878 has been met with criticism, improvements, and praise across users in the community.
As Ethereum (ETH) transitions to the proof-of-stake (PoS) consensus, a new improvement proposal (EIP 2878) is being discussed to reduce the rewards paid to proof-of-work (PoW) miners. The proposal was introduced on Aug. 11 by ConsenSys Managing Director John Lilic, and Ledger’s Global Head of Client Success Jerome de Tychey, suggesting to reduce the block reward from 2 ETH to 0.5 ETH. The uncle and nephew's rewards will also be adjusted accordingly.
“Reducing the block reward will maintain the status quo of periodic community-activated block reward reductions,” the post on ETH dev group, Ethereum Magicians reads.
Currently of the four largest PoW blockchains (BTC, ETH, BCH, and BSV), Ethereum pays miners the highest rewards for block validation. The post argues overpaying for miners is inefficient and may end up inflating the monetary base of ETH, affecting its functions as money by reducing its purchasing power.
If implemented, the 75% reduction in mining rewards will set ETH’s annual inflation rate closer to Bitcoin’s, currently at 1.8% (ETH is at 4.5%). With the launch of staking, the post estimates the annual inflation rate could jump to 5% as ETH 1.0 transitions to PoS consensus – miners and stakers both earning rewards.
Miners fear; Risk of 51% attack
Miners, especially GPU miners, are striking back at the EIP 2878, claiming it may be a disincentive to secure the network. One user on the chat claims the reduction in rewards could see several miners shut down their machines, reducing the network’s hash rate and presenting an opportunity for a 51% attack. One post reads,
“The biggest consideration, in my opinion, should be the security of the network (i.e., how do we ensure the likelihood of 51% attacks remains low, how do we keep a diverse set of miners on the network, etc.).”
Ethereum does not share a similar inflation structure as Bitcoin’s halving. Instead, the community suggests proposals to lower the inflation rate, and the community decides on it. Starting at 5 ETH rewards, the network rewards faced a 40% cut to 3 ETH, before the Muir Glacier hard fork lowered it further to 2 ETH (33% cut).
Another user claims this is “punishing the miners” for the interests of investors as the DeFi craze rages on. The user further states the proposal is aiming at shipping out miners just in time for the ETH 2.0 launch. The post reads,
“I believe it makes far more sense to change PoW rewards (commensurate with past precedent) after PoS is live.”
Some developers suggested a re-invention of the EIP 2878 proposal stating a higher reward of 1 ETH or 1.5 ETH would be a better alternative as a 75% reduction is a drastic move. The proposal is still in discussions with no significant decisions made yet, but as it seems the community is leaning on scrapping the current proposal.