Ethereum Developers Vote to Reduce Block Rewards to Tackle Inflation

Developers’ Decision

In light of delays in Ethereum’s move to Proof of Stake protocol, Casper, there has been a lively debate on how to deal with inflation in the Ethereum eco-system. After long discussions, the core developer team has now taken the decision to reduce the block reward from 3 to 2 Ether. The decision was made in the core developer meeting on Friday 31 August.

Ethereum’s native cryptocurrency, Ether, is inflationary. As blocks are mined, new Ether is created and awarded to the miners. In contrast to Bitcoin, producers of stale blocks, so-called uncles, are also paid a smaller block reward. This is due to the low block time in Ethereum, which results in a greater probability of stale blocks. Currently, Ether supply increases by around 7.3% annually. Casper promised to reduce this to 2-4%, with Vitalik Buterin even stating 0.5-2% would be possible.

Inflation was meant to be greatly reduced with Ethereum’s move to proof of stake. However, since this has been delayed, a number of proposals were put forward to reduce inflation, resulting in a community debate. The discussion not only included the Ether issuance rate, but also the removal or postponement of the difficulty timebomb. The difficulty timebomb is a built-in protocol feature aimed at making Ethereum mining much harder to motivate the community to migrate to proof of stake.

Several proposals were on the table including the following:

  • EIP-858 proposed to reduce the block reward to 1 ETH and delay the difficulty time bomb
  • Leave issuance rate unchanged and removing difficulty timebomb
  • EIP-1227 favored and increased issuance of 5 ETH per block and removing the difficulty timebomb
  • Reduce the block reward to 2 ETH and delay the difficulty timebomb by 12 months (EIP-1234)

Although a one-month long community vote resulted in 72% support for EIP-858, the Ethereum core dev team voted for EIP-1234, reducing the block reward to 2 ETH and delaying the difficulty timebomb by 12 months.

Why this Vote Matters?

The recent decision is important for two technical reasons: First of all, too much inflation is generally considered to be a bad thing and bringing down monetary issuance from an annual 7.3% to an estimated 4.8% is surely a step in the right direction. Secondly, the delay of the difficulty timebomb allows for more time to get proof of stake right, instead of rushing out a half-baked solution. The Ethereum ecosystem has now grown too large to afford introducing large-scale protocol flaws due to insufficiently tested software releases.

From a non-technical point of view, the decision is also significant. Critics have already stated that 14 developers seem to have taken a decision that went against the outcome of the poll cited above. Unsurprisingly, the EOS community, often criticized for centralization, were amongst the first to point this out.

Governance of Ethereum, and blockchains in general, is a delicate matter and good solutions are yet to be found. Maybe Ethereum’s pragmatic approach is less decentralized than intended, but avoids endless blockages, as in Bitcoin’s scaling debate. After all, the ultimate vote will be acceptance of the upgrade in the upcoming hard fork.

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Dr. Stefan Beyer
Dr. Stefan Beyer is editor-at-large at BlockTelegraph and a Blockchain consultant and smart contract auditor. He graduated from the University of Manchester in 2001 with a degree in Computer Science and obtained a Ph.D. in 2004 from the same university with the title “Dynamic Configuration of Embedded Operating Systems”. Since then he has worked in computer science research in distributed systems, fault tolerance, ubiquitous computing and cyber security. He is currently working as head of research and development for a medium-sized cyber security company in Spain.

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TigerWit Partners with Liverpool FC to Promote New Blockchain-Based Trading App

A row of Liverpool FC soccer kits.

Official ForEx Trading Partner

Liverpool FC has entered into a new global partnership with TigerWit. The English premier league has embraced the partnership, promoting TigerWit’s blockchain-enabled trading through a smart, sleek, highly-intuitive app. The app is harnessed across a distributed trading ledger.

Highly detailed, cryptographically encoded transactions are shared through the trading network. The distributed trading ledger at TigerWit is based on blockchain trade settlement, ensuring delivery of greater security, more efficiency, transparency, and trust.

The soccer giant joins other Premier league clubs to embrace Blockchain in cryptoasset trading. Just recently, Brighton & Hove Albion, Newcastle United, Tottenham Hotspur, Crystal Palace, Leicester City, Southampton, and Cardiff City announced new partnerships with eToro.

New trading partners TigerWit and Liverpool FC pose with a soccer kit that says TigerWit.
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Image Credit: Liverpool FC

Billy Hogan, Managing Director and Chief Commercial Officer of Liverpool FC, was excited about the partnership, stating, “As our official Online Foreign Exchange Trading Partner, we are very excited to develop our partnership with TigerWit. Liverpool FC has a large number of fans across the globe, particularly in TigerWit’s core markets in the UK, Europe, and Asia. Through this new partnership with TigerWit, we look forward to marketing activations, which help bring our fans around the world even closer to the Club.”

Tim Hughes, Chief Executive Officer at TigerWit, also expressed his enthusiasm with the partnership, stating, “Today is a proud day for TigerWit, we are launching our innovative blockchain-based trading app and partnering with Liverpool FC. TigerWit believes in a market that does not discriminate or play favorites. We have developed a pioneering blockchain-based settlement system that instills trust by delivering greater security and process efficiency. Trading should be, and can be, more transparent and fair for all traders, regardless of experience or the size of their account.”

What the New Deal Presents

The partnership will aid in driving technological development in Europe, the UK, and Asia. These are Liverpool strongholds with many of the League’s Kopites. Additionally, it will assist to increase downloads of the trading app in these regions.

TigerWit will also benefit from brand exposure at Anfield as well as through Liverpool’s social media channels. This is in addition to matchday privileges and club hospitality at the stadiums.

Liverpool players Alisson Becker, Georginio Wijnaldum, and Naby Keita have already been featured in a TV commercial with the brand.

Traders and users will benefit in trading with TigerWit’s app in various ways. These include; a minimum initial deposit of US$50; flexible leverage; multiple product options such as FX, precious metals, commodities, and indices; and low minimum order value of just 0.1 Lot.

This may seem to be an unusual partnership, but both groups are highly enthusiastic about the benefits and exposure they’ll give to each others’ fans.

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Cryptic Labs Brings Nobel Laureate Economists On Board

Thought Leadership Matters

Cryptic Labs, a research lab for blockchain, security, privacy, and trust, has inducted two Nobel Laureate economists into its Economics Advisory Board. Dr. Eric S. Maskin, from Harvard University, and Sir Christopher Pissarides, from the London School of Economics and Political Science, are both experts in economics who joined the board earlier this month. The two will enable the organization to better assist clients as they offer insight into game theory and macro-economic policies – two fields that are lacking in blockchain industry expertise.

Maskin, who won a Nobel Prize in 2017 for laying the foundation of mechanism design theory, will focus on game theory and mechanism design. His work will have an emphasis on how blockchain companies can guide user incentives at a company level. This contribution could be pivotal – could he help big banks put aside their fear of crypto?

“Blockchain technology is potentially important for a modern economy. Most discussions of blockchain technology focus on technical issues. I am more interested in the economic value such technology can bring,” said Maskin in the press release.

Pissarides will provide expertise on the effect of the labor and money supply at a macro level. He specializes in the economics of labor markets, macroeconomic policy, economic growth and structural change, and was awarded the 2010 Nobel Prize in Economics for his work in the economics of markets with frictions. With blockchains’ potential to disrupt so many centralized business models, how tomorrow’s labor force will work is a key question – will we learn how smart labor contracts can impact the labor market of future?

“Blockchain is the most exciting development in financial markets in recent years,” Pissaridies was quoted saying in the press release, “but we still don’t know enough about it to recommend a wholesale transition of all our transaction records to blockchain. Cryptic Labs impressed me with their mission to improve the service offered by blockchain technology, as well as the diversity and expertise of their team.”

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Dr. Eric S. Maskin and Sir Christopher Pissarides. Credit: Cryptic Labs

An Economist’s Playground

Blockchain technology has firm ties to economics. Users intuitively experience its economic value when using a blockchain-powered solution. For example, when the Volkswagen/IOTA partnership delivers their product, drivers will receive an automatic notification suggesting it’s time to service the vehicle they invested in. When UPS upgrades their global logistics with blockchain, the improved package delivery will be tangible. It’s the ideal playground for an economist. As Rob Knight, the founder of Mattereum writes in an article on Medium, economists must experiment with the technology. Their expertise in monetary policies, trade, investment, licensing, and ownership will come in full-play here.

It’s time for more economists to enter the fray. Governments and regulators don’t always deal with blockchain consistently. The EU isn’t sure about crypto, however, Malta welcomes it. In the US, the SEC continues to investigate blockchain start-ups for securities law violations whereas the state of Vermont welcomes crypto. Governments and regulators need clarity how blockchain can impact macro-economics. Which means more economists need to provide blockchain thought leadership.

Economists are the right people to explain how stablecoins could address the volatility, or how buoyant coins can provide long-term stores of value. Their time is now. As this Deloitte report states, the technology is poised for growth. The time for knowledge infusion is now.

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