Ethereum is to upgrade its network on or around October 9th through two Metropolis hardforks, Byzantium first, to be followed by Constantinople sometime around winter.
The upgrade implements a number of features, but the highlight is the delay of the difficulty bomb, which was implemented there to ensure a smooth upgrade to Proof of Stake (PoS).
PoS has been delayed, while block times have increased, somewhat slowing down ethereum’s network. The upgrade, therefore, is to delay that increase too, returning block times to around 12 seconds while also decreasing issuance from 5 eth per block to 3 eth per block.
Vlad Zamfir, an ethereum developer who is working on one of the PoS versions, out of the two proposed, suggested such reduction earlier this year. Proposing as low as 1 eth per block under the reasoning that miners were being enriched at a level higher than security requires, which may give them more resources to work against the PoS upgrade. He says:
“The increase in the price of block rewards means that miners will have much more incentive and ability to devote resources to participating in governance… When miners become more powerful, everyone else gets less of a say.”
Users seem in general to support the suggestion as far as it can be discerned from public commentary. There apparently was a vote too – which we can’t now find – showing the vast majority overwhelmingly in support.
Something you’d expect because a reduction in issuance leads to a reduction in supply. Thus if demand remains constant, a price increase might follow due to basic economics.
However, playing with such fundamental parameters opens the floor to many question and gives developers some considerable power. Power which, as we know, will necessarily be abused even if they are angels incarnate. A point Vitalik Buterin, ethereum’s inventor, raised when the matter first gained some public traction:
“I think that as Ethereum is maturing, we need to start taking norms, schelling points, and stability of policy more seriously, especially on key economic parameters. That is, moving fast on precompiles is still fine, but mucking around with block rewards, staking rewards, etc arbitrarily much less so. This is in part because while Vlad fears what miners would do to the blockchain if unfettered, I have similar fears long-term with what developers would do if unfettered, and we should be acting to limit through social norms what any of these groups can do on its own.”
The above quote articulates the reasonable, somewhat objective, and holistic, view, but he opens the way for a reduction in two ways. One of them has no basis for controversy. That is, as a common sense reduction due to the proportionate allocation of reward in a hybrid PoS/PoW between the PoS and PoW miners. The other suggestion might leave some room, but still no real basis. He says he would support a reduction:
“As part of a hard fork which delays the ice age, and has the property that miners get net expected revenue that is somewhere between the revenue that they would get if the ice age was not stopped and the revenue that they would get if 5 ETH blocks with no ice age continued forever. That is, taking the ice age delay into account, the hard fork would not hurt miners relative to the baseline of inaction. Such a reduction should also have strong community consensus.”
The reasoning for that seems to be that if issuance is not reduced, miners would actually receive more eth, thus inflation would increase. Because if issuance is left at 5eth per block, while block times half by dropping from the current 24s to around 12s, then in effect inflation is increased by 50%.
A reduction, therefore, in this sort of situation, is not forming any policy, but simply maintaining the current real parameters in light of a delay to the difficulty bomb.
Some, seemingly anonymous developers, from apparently the Ethereum Classic (ETC) crowd, disagree. Announcing a contingency plan, they state:
“Smaller incentives for mining is equal to smaller payment for security of main chain, and the risk of security caused from decrease of mining hashes may grow up higher. Since miners won’t spend their energy or equipment to smaller intensive, they would likely move to another chain before POS change.”
But, the Metropolis Byzantium upgrade does not provide smaller incentive because issuance is reduced at the same time as block times are reduces. Keeping issuance, in effect, at the same level.
All Metropolis does, therefore, is avoid an increase in inflation while undertaking a necessary delay of the difficulty bomb. So leaving no real principled stand here, either on practical or ideological grounds.
Moreover, the planners appear to have no interest in gaining any respect for they state they are to pre-mine the currency for some time to pay developers at 10% or so:
“Once we mine our stake ‘privately’ and check that there is no further problem on the chain, we will make our repository ‘public’ and release our CAHF geth node.”
They may have gotten away with such blatant violation of their own principles had there actually been a base upon which they can stand. But to argue against maintaining the same level of issuance and inflation while stating they will considerably increase inflation and take all the loot for themselves, might suggest we’re not quite dealing with bright apples.
This episode does, however, once more show the potential solution to any abuse of real or perceived power by either developers, miners or anyone else. The people are always free to simply fork.