On April 1, ethereum co-founder Vitalik Buterin played a “meta-joke” on the cryptocurrency’s community by proposing a hard cap of 120 million on the number of coins issued for ether. As it turns out, the meta-joke wasn’t a joke at all. Buterin is now suggesting that the community consider the pros and cons of his Ethereum Improvement Proposal (EIP). He has also proposed a revised issuance number of 144 million, in case it is too late to impose the 120 million liit.
Ethereum currently doesn’t have an issuance limit or a defined monetary policy for ether. Per its initial presale in 2014, ether capped its limit to 18 million per year. Ether follows the same principles as bitcoin in that its rewards and distribution are regulated on a yearly basis. “This means that while the absolute issuance is fixed, relative inflation will be decreased every year,” the cryptocurrency’s developers wrote in 2014.
But the looming Casper update, which involves a shift from Proof of Work (PoW) to Proof of Stake (PoS), has triggered introspection about governance and issuance limits for ethereum.
There are two main arguments for establishing a hard cap to ethereum. The first one is centralization. The Proof of Work algorithm, which is currently in use by ethereum, could end up consolidating mining operations for the cryptocurrency among select outfits. Bitcoin is already witnessing a similar situation. This is because solving problems to earn ether requires expensive systems with powerful CPUs that may be out of reach for average miners. As ethereum moves to PoS, establishing a fixed supply will help prevent such a situation by calibrating issuance at a variable rate and, thereby, preventing concentration of mining revenue with powerful
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