Ethereum is an unusual cryptocurrency in that there’s no fixed total supply: a certain amount of ETH is released per block. A new Ethereum Improvement Proposal (EIP), however, could significantly reduce new emissions of ETH.
On Friday, a group of 14 Ethereum developers spoke on a video call and agreed to support EIP 1234. That proposal, if enacted, would reduce new Ether (ETH) emissions from 3 ETH per block to 2 ETH per block.
Unlike bitcoin, which has a fixed supply of 21 million bitcoins, Ethereum has no fixed total supply. New ETH is emitted as each block is mined. The community has targeted a range of 0.5% to 2% inflation per year. Today, there are over 101 million ETH in circulation.
EIP 1234 is being debated as part of a series of ongoing discussions surrounding Ethereum’s scheduled October upgrade called Constantinople.
Interestingly, this week’s meeting did not include investors and miners, although the meetings from last week did.
The key takeaway from today’s meeting is that Ethereum’s difficulty bomb – a piece of code designed to add time pressure to upgrades – will be delayed for a 12 month period. This difficulty bomb has been one of the more contentious additions to Constantinople’s code.
Developers have also agreed to hold the next Ethereum hard fork 8 months after the October Constantinople upgrade.
Dropping from 3 ETH per block to 2 ETH per block may not seem like a big deal – but it is. That’s a 33% reduction in ETH emissions overnight. It’s like if the inflation rate was suddenly cut in half by one third.
Reducing the ETH block emission to 2 ETH is being called the conservative choice by researchers. The controversial addition doesn’t need to go into the Constantinople upgrade, but it will be revisited after 8 months.
“I think we also need to be conservative with changes and make changes incrementally, and not dictate changes against the will of the community, but apply conservative measures in doing changes but trying to keep with the intent of the community,” said Ethereum security researcher Martin Swende during the call, as reported by CoinDesk.
The move is expected to bring ETH issuance down to the range of 0.5% or 1% per year.
Other upgrades for Constantinople are still being debated. The developers and community have not yet agreed, for example, on an algorithm change that would make Ethereum more ASIC-resistant.
Ethereum is slowly migrating from a GPU-dominated mining ecosystem to an ASIC-dominated mining ecosystem. ASICs are specialized mining hardware. We first saw ASICs for bitcoin, but now companies like Bitmain and other giants are releasing Ethereum ASICs.
In addition to the controversial changes mentioned above, the Constantinople October upgrade for Ethereum will include EIP 145, EIP 1014, EIP 1052, and EIP 1283, none of which are seen as controversial. All of these improvement proposals boost efficiency and scalability on the network.
Theoretically, reducing ETH emissions from 3 ETH to 2 ETH should raise the value of your ETH. It makes your ETH more valuable than it would be if there were 3 ETH emitted per block. This is good news for ETH holders, although it’s unclear if this will change after the 8 month period.