Ethereum inflation rate could go down (and that’s good)
OK, let’s get things straight: cryptocurrencies, be it Bitcoin, Ethereum or otherwise, often have inflation rates. Apart from a few selected cryptocurrencies, the growth in supply of Bitcoin is the lowest and has therefore remained a benchmark for other cryptocurrencies to be achieved.
Some have even gone so far as to say that digital assets that don’t match Bitcoin’s rate of inflation, which is currently around 3.5% (higher than the US-reported 2% inflation rate), are inferior and not the opportunities to become a viable form of digital money.
This was even the case with Ethereum, which many staunch Bitcoin proponents condemn for its lack of a mathematically enforced supply cap and its ever-changing rate of spending, currently based on block times and uncle rates. But that could change soon.
According to a recent report by CoinTelegraph, the core group of Ethereum developers working on the Serenity upgrade are trying hard to drastically reduce the amount of ETH spent. In fact, Justin Drake, an Ethereum Foundation researcher, stated that Ethereum’s inflation rate (around 4% to 5%) could be reduced by more than 90% by March 2021. He explained:
“Here’s a possible schedule (dates probably completely wrong!) Highlighting key milestones: January 2020: Beacon chain launch. June 2020: eth2 light clients ready for production. November 2020: eth1 fork # 1 should honor its fork selection rule eth2 finality (conservative, no output reduced). March 2021: eth1 fork # 2 to reduce the output by ten times. “
Such a reduction, of course, depends on how willing the community members (most importantly, miners) are to accept Ethereum 2.0, the first massive blockchain upgrade that would end the use of Proof of Work in the chain and focus on the life of . affects some funds and companies.
(Aside, Ethereum inventor and Canadian prodigy Vitalik Buterin describes Serenity as “a way to bring together tech improvements like PoS and sharding to improve the virtual machine, Merkle Trees, protocol efficiency, and a whole bunch of little tech things,” that you’ve never heard of. “Per Buterin, all of this is being done to create a” next generation blockchain, “one hundred times faster and more scalable than the current iteration of Ethereum.)
According to a Twitter user from Token State, this reduction will bring Ethereum’s inflation down to 0.5%, which by many standards is extremely low and even negligible from a short-term perspective. This is so low that, from a purely percentage point of view, less Ethereum is being spent than Bitcoin, even after the auspicious halving event in 2020. In other words, as long as demand for ETH is sustained or even grows, the planned upgrade for the price of the Asset to be insane bullish.
Ethereum’s emissions plan is expected to drop to ~ 0.5%.
This does not apply to Validator rewards, which are forecast to be 3-5% per year.
ETH is about to experience a massive supply shock and will be unlike anything we’ve ever seen in Crypto before.
If you thought BTC was running out, just wait until 2.0.
– Token State (ETH Tokenized the World’s SOVs-1559) (@tokenstate) July 5, 2019
This news comes shortly after Ethereum 2.0’s zero phase, the first code specification freeze, the full version of which is expected to hit the market in early 2020.
Photo by Andreas Weiland on Unsplash