Ethereum is the brainchild of Vitalik Buterin, the young developer who has achieved so much with the blockchain he built. On April 1, 2018, Buterin proposed a 120 million hard cap on Ethereum in an apparent April Fool’s joke that had more serious implications. On GitHub, Buterin opened an Ether community debate on the possibility of capping ETH issue at some point. He mooted a final supply of double the ICO takings – 120,204,432 tokens.
Buterin’s argument was that in order to safeguard the economic sustainability of the platform into the unknown future, an agreement of a hard cap for the overall supply of Ether would be necessary. His comments make sense in light of in-house considerations, apart from any typical economic concerns.
The current Ethereum Proof of Work (PoW) protocol is being abandoned for Proof of Stake (PoS). “Issuing new coins to proof of work miners,” Buterin said, “is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal.”
Ethereum’s more famous peer, Bitcoin, was built to cap at a fixed 21 million coins. For this reason, investors often refer to BTC as a deflationary coin. More than 80 percent of bitcoin has already been mined, with less than 20 percent of the coins still to be released into circulation. The project was one of the earliest to factor in digital scarcity, and the 21 million bitcoin are likely to increase in value over time.
Buterin’s encapsulation speaks volumes of a project that has very maturely and so far successfully navigated previous fundamental concerns. He made a convincing argument for capping ETH supply, saying that the community would have to decide on what to do.
Legacy economy models baulk at the prospect of a limitless money supply. It makes sense that, in a scenario of unlimited supply, any currency is theoretically worthless. While Bitcoin is deflationary, Ethereum isn’t built that way. Beyond strict money supply principles, when every government has a license to print as much fiat as it wishes, what are the real-time implications of endless ether?
Some commentators note that if the project were to cap its coin issue, it might become a lot more attractive to investors. Particularly newcomer legacy investors have steered clear of Ethereum in spite of its massive, real value.
By the same token, many have also steered clear of bitcoin for its volatility, but the fact remains that money supply influences the value of a currency – or should. Anti-legacy enthusiasts are protesting the proposal, but it does seem likely that considerations of ETH’s long-term viability will prevail.
As opposed to the average user experience, those involved with development on the project sustain a different focus and ethos. It’s a short step to fundamental divisions, with the hardcore maintaining that Ethereum is first and foremost a computing system, and currency values and their associated concerns should have no audience. They also point to ether’s purposes around the chain’s security and are heavily ill-disposed towards seeing ETH as a commercial currency, much less a speculative digital asset.
Buterin has shown much charm and persuasion in his dealings with the community and has been broadly successful in steering crucial matters to date. He appears to strike the perfect balance between the average person and the tech experts, and also placates the antis with the same egalitarian stance they insist remains untouched.
Most chat rooms appear a moosh-mash of “a bunch of people arguing pseudo economics with each other,” according to a prominent project developer and firm anti, Nick Johnson. The considerations of whether or not to cap Ethereum tokens is many-hued and often poorly informed by people who have no comprehensive understanding of economics. It appears likely that broader, middle-of-the-road thinking will prevail, and that one day there will be no more ETH to mine.
For the interim, advice in the community is to make hay while the sun shines, and to make the best use of available Ethereum-mining platforms. There is much value to be gleaned yet.