Ethereum Planning to Reduce Issuance in 2021

Ethereum might reduce issuance by 10x in two years according to an estimated timeline by Justin Drake, an eth 2.0 researcher at the Ethereum Foundation (EF). He said:

“Here’s a possible timeline (dates likely totally wrong!) highlighting the key milestones:

January 2020: beacon chain launch. June 2020: eth2 light clients production-ready. November 2020: eth1 fork #1 to have its fork choice rule honour eth2 finality (conservatively, no issuance reduced). March 2021: eth1 fork #2 to reduce issuance by 10x.

A few non-technical things that are harder for me to predict: How fast we will get 2 million ETH (65,000 validators) for the beacon chain launch. How fast eth1 governance is willing to move with the two hard forks.”

Previously it was stated issuance would be reduced by about 10x, so from 2 eth per block to around 0.22 eth per block depending on how many stake, once the Proof of Work (PoW) chain is discarded.

Chances PoW is discarded by 2021 are very slim as there will have to be a transition period whereby smart contracts and much else move to the sharded Beacon chain.

Full sharding is estimated to launch by 2021, with then quite a few years probably needed for the ecosystem to sufficiently transition to the point PoW can be discarded.

The original idea was some sort of hybrid transition period where stakers secure the PoW chain through decentralized checkpoints, referred to above by Drake as finality.

Once this was implemented, the idea was for PoW blocks to be reduced to 0.6eth, but Drake is saying “conservatively, no issuance reduced.”

There is also the PoW mining difficulty bomb that kicks in around March next year. That will have to be delayed again, with it unclear whether an issuance reduction would go with it at the same time as it has previously every time it was delayed.

As ethereum lacks a coded algorithmic reduction, decision making is complicated with plans appearing to change somewhat often and with clarity difficult to come by.

Ethereum researchers do not seem too happy to respond to questions when reached out presumably because they haven’t yet finalized the details.

Hence there’s some confusion on whether ethereum’s new supply will increase once staking goes out in or around January next year just weeks before bitcoin algorithmically cuts it in half.

The current thinking appears to be no reduction until the PoW chain is discarded perhaps in 2021, but unless they come up with some trick, it’s not clear how the PoW chain would be discarded anywhere near 2021.

Nor is it clear why issuance wouldn’t be reduced if PoW finality is implemented, with such implementation apparently not being trivial, unless Drake is suggesting PoW blocks would reduce by 10x based on finality with staking then in addition.

Until finality is implemented, the PoS chain has no effect at all on the PoW chain, while the PoW chain is followed by stakers.

Meaning any discussion in regards to issuance would have to focus on how it might affect PoW’s security, with that question difficult to answer because it would presumably depend on how price would react with price generally the main – if not only – determinant of the level of a network’s security as far as the current PoW blockchain is concerned.

So all there might be next year is this new chain where people can send eth to stake with that eth not able to get back to the PoW chain as far as the current design is concerned, leading to many known unknowns and unknown unknowns as ethereum effectively heads to an experimental stage in its path to the sharding upgrade.