Against Vitalik’s fixed supply EIP (EIP 960)
Hi everyone! This is just an opinion piece :)
Vitalik cleverly made a controversial EIP on April fools:
But notes that it doesn’t matter whether or not it was made in jest:
I don’t like the proposal, so I’m going to give my opinion about it :)
We don’t know what Ether supply model is optimal
I think this is a fact.
It’s still unclear today how much issuance will be required (if any) for the security of the consensus protocol. This is true today with PoW, and in the future with Casper and sharding.
Today the average block reward (including uncle rewards and uncle inclusion rewards) is about 3.44 ETH, and there are about 5,900 blocks per day, for a total of (lets say) 20,296 ETH issued per day. This ETH is delivered to miners by the protocol (on top of the fees they collect). At today’s market rate for ETH, this is over 10M USD per day of issuance.
What is the correct rate of issuance for consensus? I don’t know. But I’m confident that the price is not right. I will be skeptical if you say that it is, or if you say that you know what the price should be.
Is Vitalik’s proposed amount of issuance (another 22M ETH, and then no more) the correct amount? We don’t know that. But today we’re talking about giving miners/validators a pile of ETH valued at market at over 11B USD.
But I suppose that Vitalik did not say what the ETH should be issued for!
For other purposes
Do we know what public goods we collectively will be willing to issue ETH to fund? Can we forecast the cost of those goods today? Is it more or less than 22M ETH? Are there publicly beneficial supply numbers? Can we predict the optimal supply of ETH far into the future?
I think the answer to all of these questions is no, we don’t know. But still, people are seriously considering a proposal to issue 22M ETH (and then no more) (even though it was a proposal made on April fools).
So, I don’t think that we have the understanding required to actually meaningfully know what we would be consenting to, and especially if it’s a good idea, if we collectively decide to go with EIP 190.
But finally, the main reason that I am strongly opposed to this EIP is that imo:
Speculators selfishly want certainty about the supply model
I think there two reasons that they want it:
- They don’t want their “investment” to “be diluted”
- They want to create the perception of scarcity
Both of these desires are selfish, in that they would gain at the expense of others. The first is akin to “don’t let them have any so my % of the pie can be bigger”, and the second is… well… lets let smashmouth say it:
“Don’t delay, act now! Supplies are running out!”
The perception of scarcity of a good makes it more psychologically appealing to potential buyers. There’s lots of evidence but I won’t google it for you :P
Indeed, the powerful behavioural effect of perceived scarcity has taken the altcoin space by storm, where nearly every altcoin is advertised with their finite supply model, and where the norm is for “scarcity-buyers” to know the supply model before purchasing. I think it’s stupid and annoying at best.
At very best, the EIP 190 discussion is premature given our collectively state of knowledge about the economic realities of the issuance and supply of ETH.
More realistically, it’s an artifact of broader cryptocurrency culture, where there is a norm for supply models to be part of a blockchain’s social contract.
I don’t think that complying with this norm (presumably for the benefit of coin holders or miners/validators) makes sense, especially given the current state of our knowledge about the amount of issuance that would be required (nevermind ideal) for consensus or for other purposes.