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Ethereum Developers Move to Alter the Blockchain's Economics

A proposal that, if enacted, would change how much new cryptocurrency is released on the world’s second-largest blockchain was finalized Friday, with developers agreeing to include the code for such a change as part of ethereum’s upcoming October upgrade, Constantinople.

Speaking on a video call, a group of 14 developers agreed to support code that would reduce the amount of new cryptocurrency introduced on ethereum to 2 ETH per block, down from 3 ETH today, by implementing an updated version of an ethereum improvement upgrade named EIP 1234.

Notably, investors and miners who attended a meeting on which upgrades should be included in Constantinople last week were not invited to this week’s meeting and did not attend.

But while this week’s meeting featured a more limited number of attendees, those present agreed that the difficulty bomb — a piece of code intended to add time pressure to upgrades, and that has influenced discussion of Constantinople’s code — will be delayed for a 12-month period.

Yet another hard fork, or network-wide software upgrade, will be planned to occur 8 months from the upgrade to Constantinople, developers agreed.

With controversy building on the issuance change – and multiple parties arguing for different outcomes – a reduction to 2 ETH was positioned as the conservative choice.

Depending on the perceived outcome of the change to ethereum’s code, security researcher Martin Swende suggested revisiting the question after the 8-month period.

“I think we also need to be conservative with changes and make changes incrementally, and not dictate changes against the will of the community, but apply conservative measures in doing changes but trying to keep with the intent of the community,” Swende said during the call.

Speaking in the meeting, Casper developer for the Ethereum Foundation Danny Ryan echoed this point, stating that because issuance is likely to drop considerably in an upcoming upgrade that will find ethereum making a dramatic changes in how the network is secured, a decision in the interim should be seen as “incremental compromises until we get to the vision.”

“Everything I view in the issuance discussion is an incremental compromise to encourage the community and move things sanely until we move to proof-of-stake, which will bring issuance down to the range of 0.5 or 1 percent per year, and at that point I think the community will certainly be happy. These are incremental compromises until we get to that goal,” Ryan said.

A decision has yet to be made on an algorithm change that would to restrict the use of ASICs, a type of specialized mining hardware, from the platform.

Speaking in the meeting, several developers argued that research should continue in this direction, while Ryan said there might be potential funding from the Ethereum Foundation.

“There’s a potential for a grant here,” Ryan said.
Several further non-contentious upgrades were also confirmed for the upcoming hard fork.

As detailed by CoinDesk, these include EIP 145, EIP 1014, EIP 1052, and EIP 1283, which work to increase efficiency and scalability.

“Those are all accepted and we are all on board with those being the four Constaninope EIPs,” ethereum developer Piper Merriam concluded.

Mining hardware via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Ethereum Meeting Leaves Open Questions Ahead of October Upgrade

A phone call that brought together a broad representation of the ethereum community to discuss critical code changes on which decisions need to be made ahead of a software upgrade scheduled for October, failed to produce immediate results Friday.

The bi-weekly developers call, which this week included a majority of the network’s miners and some prominent investors, had the goal of forging consensus on changes to ethereum’s underlying economics, the speed of its upgrades and the mining methods it supports, as well as establishing an order in which concerns might be addressed through future upgrades.

However, despite nearly two hours of dialogue, the meeting ended with the resolution that the discussion continue, with a follow-on meeting scheduled for August 31.

Adding necessity to the talks is that the so-called “difficulty bomb,” a piece of code that, in seeking to encourage quicker updates to the protocol, must be delayed or removed.

The presence of the deadline, set for early 2019, has complicated the question of whether to implement a proof-of-work change to remove specialized mining hardware, or ASICs, from the platform, whether its rewards are being distributed fairly and whether such changes should be made together.

But, since miners, developers and investors are all impacted – some could gain or lose money, depending on the decision – the conversation might be best seen as a difficult first step in making such choices.

Chairman of the decision Hudson Jameson said:

“I honestly don’t know how to make a decision. I don’t know how we’ll go from here.”

Issuance debated

A lack of firm decision-making aside, significant time was spent discussing how much ether is created and distributed with every transaction block that is mined.

Two participants in the call – Brian Venturo, CTO of mining facility operator Atlantic Crypto, and software developer Matthew White – called not only for an issuance reduction, but went as far as asking developers to commit to limiting the total amount of ether that can ever be created.

That move would deviate from previous roadmaps, in which a cap wouldn’t be added until an anticipated change to a proof-of-stake consensus method that would remove the need for mining hardware entirely.

Others sought to frame the question as one that is in the interests of all parties who use ether – even developers who may not necessarily earn rewards.

“Getting the issuance under control will have good effects for price which is important for developer salaries and projects and funding new projects,” White said.

Speaking at the meeting, Xin Xu, the CEO of an ethereum mining pool named Sparkpool that supports over 20 percent of the ethereum hashrate, warned about the consequences of lowering the issuance rate or block reward too substantially.

“There is a tipping point and when we get there everything will break down and we cannot get back. In my opinion the change of issuance will be a big impact to the security.” Xin said.

ASIC resistance

And even though ethereum’s proof-of-work mining is expected to be replaced later in the roadmap, stakeholders faced another contentious topic: whether to block the use of specialized chips that could crowd out many of today’s GPU-dependent miners.

At issue is the recent release of specialized ASICs designed to maximize miner profits and push out those who have less-competitive miners – or are unable to buy the latest hardware.

Given that the issuance reduction would effectively amount to a cut in pay for miners, ethereum developer Danny Ryan suggested that blocking ASICs from the network might constitute a “reasonable compromise” for GPU-dependent miners.

Jameson said that such a code change could be implemented in a subsequent hard fork, eight months after Constantinople has activated — however, the testing required might be too substantial for it to be included in October’s planned hard fork.

And while there was broad consensus from the miners present to keep ASICs off the platform, several developers pushed back against the code change proposal, stating that they were “skeptical” that it could accomplish its aims.

Others warned that a change that is too substantial could actually be damaging to GPU miners, who have optimized their equipment for ethereum’s code.

In the end, Jameson urged participants to continue the discussion on social media, remarking:

“Between now and next Friday there will be more community comment about the EIPs and the different perspectives here.”

Blackboard image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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A Phone Call Could Impact Ethereum's Future – And It's Happening Today

Miners, investors, developers and more.

That’s a summary of the diverse set of ethereum stakeholders that will be in attendance at an upcoming developer call, according to Ethereum Foundation communication officer Hudson Jameson. Set to take place at 14:00 UTC Friday, the live-streamed meeting aims to address some of the platform’s most challenging questions ahead of its system-wide upgrade planned for October.

As part of that upgrade, there are several non-contentious ethereum improvement proposals (EIPs) already ready for testing, but also included are others that have stirred up controversy.

In particular, three concepts – the difficulty bomb, ether issuance and ASIC resistance – are at the heart of the debate, since each could have a lasting impact on how the blockchain operates. For instance, these code proposals could alter the regularity of ethereum upgrades, change the network’s economic policy and prevent specialized hardware from mining on the blockchain.

As such, core developers that usually attend the meetings have called for a larger set of voices, namely ether miners and investors, to be present to discuss a way forward.

“There is a strong community sentiment toward delaying the bomb, to reduce the block reward and to introduce changes to the hashing algorithm, however, it’s unclear how we proceed from here,” communications officer for ethereum software provider Parity Technologies, Afri Schoedon, told CoinDesk.

In the run up to the meeting, debate has been building on social media, with many of the platform’s stakeholders holding incompatible view points. And because the outcome will impact stakeholders in conflicting ways, Jameson has invited a number of people to the call to give their positions on the proposals.

“We have multiple miners, including nearly 50 percent of the ethereum hashing power (46 percent) either attending the call or making statements that will be read during the call,” Jameson said.

He told CoinDesk:

“Our aim was to have a variety of voices collaborate on this issue.”

Investors

Adding urgency to the current discussion is the so-called “difficulty bomb” – a piece of code locked into the platform that makes its blocks steadily less efficient to mine over time.

Because delaying the bomb also impacts issuance, there are a total of six conflicting proposals, each offering slightly varying methods for moving forward.  

Two proposals on the agenda for Friday’s meeting seek to reduce issuance — something some ether holders believe is too high. (Currently, the inflation rate is fixed at 3 ETH per block — down from 5 ETH since last October.)

While there’s a host of ethereum investors who have yet to publicly comment on the matter, several investors have taken to social media to call for a reduction in ethereum issuance, contending that the current inflation rate is an unnecessarily high tax on the holders of the cryptocurrency.

For example, some are pointing to a quote attributed to the creator of ethereum Vitalik Buterin in 2017 that states: “In the foreseeable future, the supply will not go far above 100 million,” a figure which as now been surpassed.

Others are going so far as to blame the inflation rate as the reason for ether’s market value decline, which hit a 2018 low of less than $300 earlier this month.

“Ether issuance is wildly over where it should be,” one user wrote.

Still, because it decreases the quantity of ether that miners are awarded to mine blocks, there’s a risk that too high an issuance reduction with be harmful to miners, forcing them to move their equipment onto another network.

Miners

That said, some are arguing that despite high issuance, miners that rely on general purpose hardware are already suffering.

“There is basically zero profit right now for normal GPU miners,” one user claimed on Github.

As detailed by CoinDesk, while ethereum was previously thought to be a GPU-friendly, ASIC-resistant cryptocurrency, the specialized mining chips have been available for use on the network since March. Leading advocates of GPU mining argue that efforts should be made immediately to remove the hardware from the platform.

In the past few months, the questions of ASIC resistance largely fell quiet, but questions around tweaking the difficulty bomb and underlying issuance model have caused the arguments to reactivate. And that’s because proponents argue that a reduction in issuance could push the last remaining GPU miners off the network, that are already competing against a rising hashrate.

Several stakeholders are pointing to a proposal named EIP 1057 as a method for ASIC resistance, that uses a randomizing, ASIC-resistant proof-of-work algorithm originally designed for monero to remain resilient against ASIC hardware manufacturers.

Speaking to CoinDesk, Peter Pratscher, the founder and CEO of Ethermine, an ether mining pool, said that among the company’s miners, the question of ASIC resistant eclipses all other concerns.

“We have reached out to our miners and from their response, it is clear that the most important point for them is to include a [proof-of-work] change to obsolescence ASICs,” Pratscher said, adding that the attitude around issuance was “somewhat ambivalent.”

Still, it’s a question that has proven to be divisive, with some users taking to Reddit to warn it is “not the answer,” and could impinge on valuable developer time in the run up to proof-of-stake.

Developers

Of all the platforms stakeholders, developers are perhaps the most difficult to pin down – especially as many avoid taking a position in polarized debates, preferring instead to focus on delivering code.

Still, among this group, there’s a general tendency to be less interested in the question of issuance — in part because there’s an attitude that the high valuation of ether reduces its usefulness within the platform.

For many ethereum developers for example, the question of ASIC resistance is also of important ideological importance, because it relates to the underlying decentralization of the network — and therefore its resilience to attack.

Others hold the inverse position, believing that by raising the cost of attacking the network — ASICs are comparatively much more expensive than GPUs — the hardware is good for security.

That said, there is a topic that remains of particular interest to the developers – the difficulty bomb.

“Delaying the bomb is the easiest part, everyone pretty much agrees we should do that,” Schoedon told CoinDesk.

And while it’s true the consensus roughly is that the bomb should be delayed, there’s some disagreement about whether to remove its code entirely or to keep it embedded in the software. Because it was installed to prepare the network for the change to proof-of-stake, some argue that it is now irrelevant given the delay in that change’s timeline for execution.

Still, others believe that it has developed an entirely new function — forcing ethereum to come together and find consensus on complicated problems, just like these.

Speaking to this, because of the difficulty bomb, core developer Nick Johnson told CoinDesk:

“People are welcome to stick with the status quo, but they have to make an affirmative decision to do so, rather than letting inertia do the work for them.”

Phone via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.