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Ethereum (ETH) Co-Founder Provides Answer To Long-Lived Supply Limit Question

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Since Ethereum (ETH) is an all-time immediate follower of Bitcoin, people are fond of making sundry of comparisons and disparities between the two, with the perspective that no other coin is more of a competitor to Bitcoin than Ethereum.

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Even though Ethereum blockchain was created in the year 2015, 6 years after the invention of Bitcoin (crypto father), all other coins created after the rookie were still not able to take the second position from Ethereum, therefore, Ethereum is truly the closest altcoin to compare with Bitcoin in spite of the fact that they were both created with the principle of distributed ledgers and cryptography.

Amongst the features, which initiated the comparison of both altcoins from people are the programing language used, transaction speed, and purpose of creation, among others.  One important attribute of the altcoin that should not be left unmentioned and has over time been the talk of the town is the “limit of each altcoin’s total supply”.

Since Ethereum is yet to announced the total coin to be available in circulation, different questions, suggestions, and conclusions have been awakened on whether the cryptocurrency has or will have supply limit. While the matter has created incision for the altcoin, its counterpart, Bitcoin was from inception created with a limited supply of 21 million Bitcoins. Based on this fact, investor and some users are of the opinion that Bitcoin is a more viable altcoin to invest in.

The owner and co-founder of Ethreeum, Vitalik Buterin on Sunday, April 1, 2018, in an authorized Ethereum Improvement Proposal (EIP), aired the newly proposed supply limit for the blockchain technology.

“I propose that we agree on a hard cap for the total quantity of ETH,” he said.

While disclosing his intention, the Russian-Canadian programmer made mention of the likely possible limit range which would be set for the network.

“I recommend setting MAX_SUPPLY = 120,204,432, or exactly 2x the amount of ETH sold in the original ether sale”, Buterin who also the founder of Bitcoin magazine added.

If you could vividly remember, the network sold out a total amount of 72,009,990.50 in 2014; therefore, if 2x the amount would be set, it will be around the range of 144 million.

Previously, why people were skeptical about the possibility of the network setting limit for its total supply was because, while bitcoin slated 21 million BTC supply, Ethereum issues 18million ETH supply every year.

According to the owner, the proposal to hard cap the total supply of ETH was initiated because “issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal”.

The April 1st post, which is still a proposal, has made it clear that an agreed decision has not be made on whether the limit will be set to 120 million or 144 million, but the effort was made to secure “economic sustainability” for the network.

“In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, and in light of the fact that issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal, I propose that we agree on a hard cap for the total quantity of ETH”.

While Ethereum uses “proof of work” algorithm known as ethash, the Ethereum improvement release made by Buterin on the monetary policy of the platform which was the first of its kind in recent time identified that if the network were to switch to Proof of Stake(PoS) algorithm, rewards will decrease greatly.

“In the longer term, the supply would exponentially approach the max cap and the rewards would exponentially approach zero, so if hypothetically Ethereum stays with proof of work forever, this would halve rewards every 744 days. In reality, however, rewards will decrease greatly with the switch to proof of stake, and fees such as rent (as well as slashed validators) will decrease the ETH supply, so the actual ETH supply will reach some equilibrium below MAX_SUPPLY where rewards and penalties/fees cancel out, and so rewards will always remain at some positive level above zero,” the statement added.

Following the release, users have responded to the development with sundry of comments based on their perception. While some commended the effort as a great one that will attract greater development, others criticized the action, saying it was done because the price of Ethereum is plunging in recent time.

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