Ethereum Developers Have Reached An Agreement to Reduce the Block Reward
In an Ethereum core developer meet, Ethereum developers have reached an agreement to reduce the block reward from 3 ETH to 2 ETH. 15 developers took part in this special meet which was live streamed and was viewed by Ethereum holders and miners as well.
Block rewards were reduced in conjunction with the Ethereum Improvement Proposal (EIP) 1295, and 1234. EIP proposal points out that the average time to mine a block is increasing due to the “difficulty bomb”. EIP 1234 proposes to reduce the block rewards to delay the difficulty bomb by 12 months.
According to the proposal EIP (Ethereum Improvement Proposal) 1234:
“The Casper development and switch to proof-of-stake is delayed, the Ethash proof-of-work should be feasible for miners and allow sealing new blocks every 15 seconds on average for another 12 months. With the delay of the ice age, there is a desire to not suddenly also increase miner rewards. The difficulty bomb has been known about for a long time and now it’s going to stop from happening. In order to maintain stability of the system, a block reward reduction that offsets the ice age delay would leave the system in the same general state as before. Reducing the reward also decreases the likelihood of a miner driven chain split as Ethereum approaches proof-of-stake.”
Many viewers commented to reduce the block reward to 1.5 ETH, but the developers said it’s better to make these changes incrementally. Miners weren’t so thrilled by the block reduction but said that they can manage with 2 ETH.
What is the Difficulty Bomb?
According to Investopedia, difficulty bomb is the term used to describe the difficulty in mining which results from an increased amount of time required to mine a new block. This difficulty in mining leads to a situation where mining becomes unprofitable or worse case impossible.
So what does it all mean?
If the EIP 1234 proposal is implemented then the inflation would reduce from current 7.40% to 4.70%. The miner rewards would also be reduced, so essentially the goal is to come to a nice balance between the needs of the miners, users, and devs without falling off balance which is what a decentralized protocol is supposed to achieve.
Some argue that inflation should not have gone this high in the first place because the goal has been to shift to Proof of Stake after which the issuance will come down to 0.5% – 1% per year which is a desirable outcome.
A developer called this: “incremental compromises until we get to the vision”
Eric Conner Tweeted:
With EIP-1234 in place, here are updated Ethereum issuance numbers in 2019.
In summary, a lot of unnecessary selling pressure is now out of the market and inflation is around 4.7%. pic.twitter.com/DbHFUWZhza
— Eric Conner (@econoar) August 31, 2018
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