Ethereum’s Proof of Work Miners’ Block Reward to be Reduced to 0.6 Eth

Ethereum has published the specifications for stage one of Friendly Finality Gadget Casper (FFG Casper), otherwise known as the hybrid Proof of Work (PoW) / Proof of Stake (PoS) upgrade.

A specification that finally reveals one of the most important parameter, block reward. For ethereum, it will be reduced some 80%, from 3 to 0.6 eth per block, for Proof of Work miners. They say:

“In this proposed spec for stage 1 Casper, Ethereum will transition from pure proof of work to hybrid PoW/PoS.

In this scheme, all of the proof of work mechanics will continue to exist albeit with a reduced block reward (0.6 ETH), but additional proof of stake mechanisms will be added.

In particular, the fork choice rule (ie. the way that a client determines which chain is ‘the canonical chain’) will be modified to take these mechanics into account.”

The specification does not reveal the block reward for stakes as far as we can see and we were unable to receive an answer in time for publishing.

It may be therefore the block reward remains as it is, with 2.4 going to stakers and 0.6 to miners, but considering the far reduced cost of staking, it may be stakers receive far less.

Not least because the plan is for the entire block reward to fall to 0.22 eth per block once full sharding and full Casper is implemented with Vitalik Buterin, ethereum’s founder, stating recently:

“Currently, an expected value is 10 million ETH staking at 5% interest, which is 500,000 ETH per year (~0.22 ETH per block).”

There’s quite some way to go until then, with implementation likely to be in stages, potentially starting with FFG Casper which is currently on testnet.

An update on how that’s goin is expected on April the 6th during the weekly meeting of ethereum developers when a time estimate might also be provided.

To give you a rough idea, currently FFG Casper is implemented in only one or two clients as far as we are aware, most prominent being pyethereum.

That’s doing the “raw” testing, getting it to a good enough stage for implementation in the main clients of Geth and Parity.

Once they’ve implemented it they’ll want to do some more testing, so summer might be optimistic, autumn perhaps, winter hopefully, but maybe Q1 2019 would be safer to say.

They could be moving far faster, of course, they’ve done that before and the impeding arrival of asics might speed it up, but Buterin has previously estimated it in late 2018 or so.

We’ll get a better idea in the next few days perhaps, but GPU and asics miners are now seemingly on notice that very soon rewards will fall considerably.

That’s because another validation/consensus layer will be added to Proof of Work through casper staking. That being a node that uses eth, rather than GPU work or asics work, to verify their “identity” or to verify they are not a fake sybil node.

The role of these staking nodes is to create new checkpoints, which to simplify can be seen as genesis blocks. That is, if there is a 51% attack, the chain history can not be reversed beyond the checkpoints which are finalized every 50th block.

The idea is then to have only these staking nodes validate everything, thus making hardware energy consumption unnecessary. With the first step of it now seemingly reaching the final stages.