A proposal has been finalized by Ethereum developers to reduce the block rewards from three ETH to two ETH. The code for the change is to be introduced in the Constantinople hard fork, and the proposal was finalized via a video conference of 14 developers. Details on the upgrade can be observed on the Github post.
A conservative block rewards reduction
The move comes amidst controversy in the community that the block rewards are too high. Many wanted the block rewards reduced to be one ETH to satisfy the community without being too harsh on miners; the block rewards are to be reduced to two ETH. If the reduction was too high, then miners would simply gravitate towards alternative cryptocurrencies. According to the author of the proposal –
“We have a strong user base of investors who want to reduce as much as possible but we have miners that said they’d agree to a small reduction, and that’s why i think we should go with 2 ETH per block.”
The Constantinople hard fork is to help Ethereum transition from a Proof of Work (POW) consensus mechanism to a Proof of Stake (POS). This will further increase efficiency and reduce fees. It would also remove these types of problems from cropping up in the first place.
The problem with proof of work
A POS system eliminates mining interests, which can become problematic. With POS, people can vote in proportion to their investment in the ecosystem, as opposed to having competing interests between miners, coin owners, and developers.
In the case of Bitcoin, mining centralization is a massive problem with large mining pools and Bitmain maintaining a monopoly on the hardware manufacturing industry. Many have spoken out about the issues with ASIC mining. Ethereum is currently working on ASIC resistant research via algorithm changes, though the developers have been unable to reach a consensus. Bitcoin block rewards reduce every 210,000 blocks by half to control inflation.
The Ethereum ethos right now is to make gradual changes to make the transition from POW to POS, a situation that will make everybody happy. The Constantinople hard fork will be the biggest in Ethereum’s history, currently the second largest coin by market capitalization at around USD 30 Billion. Constantinople will feature four upgrades to be implemented – EIP 145, EIP 1014, EIP 1052, and EIP 1283. All are concerned with efficiency and scalability.
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