Why Vitalik Buterin Is Proposing A 120 mn Ethereum Hard Cap?

Vitalik Buterin, the co-founder of cryptocurrency Ethereum has suggested an ethereum hard cap of 120 million. It is expected that it would go live with the first phase of Casper update which if gets approved can potentially give its prices a boost.

Ethereum hard cap 2x: Expected to bring economic stability to the ETH platform

On April 1, 2018, Ethereum co-founder Vitalik Buterin took to Github to present his proposal of a hard cap of 120 million Ether for Ethereum. Being released on the April fools day, some thought it might be a joke. The suggestion to cap the ethereum supply at 120 million or 120,204,432, to be exact will be about the double of ETH amount sold in the original sale of ether.

The Github post certainly came as a surprise. In his post, Buterin mentioned that:

“In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, and in light of the fact that issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal, I propose that we agree on a hard cap for the total quantity of ETH.”

Talking about the rewards, Buterin does share an interesting explanation as to why rewards would never reach zero but would stay positive.

“In the longer term, the supply would exponentially approach the max cap and the rewards would exponentially approach zero, so if hypothetically Ethereum stays with proof of work forever, this would halve rewards every 744 days. In reality, however, rewards will decrease greatly with the switch to proof of stake, and fees such as rent (as well as slashed validators) will decrease the ETH supply, so the actual ETH supply will reach some equilibrium below MAX_SUPPLY where rewards and penalties/fees cancel out, and so rewards will always remain at some positive level above zero.”

Also, read: ETH Prices Are Dropping And The Reason Is ‘Not’ BTC?

Likely to roll out with the 1st phase of Casper update

There is no surety yet if Buterin is all serious but about four months back, he said something on the similar grounds:

“One possibility I’ve thought about is setting the hard cap for the total ETH supply to some number MAXCAP (eg. to make it a clean 2x of the presale, could be 120,204,432), and then scale all rewards by (MAXCAP – CURSUPPLY). This way the supply would automatically approach MAXCAP with an exponential decay curve and be guaranteed to never reach or exceed it.”

Buterin further suggests that this implementation can occur with the next hard fork of ethereum. It is likely that it would be in the Casper update’s first phase. Moreover, this would require “redenominating all in-protocol rewards, including mining rewards, staking interest, staking rewards in the sharding system and any other future rewards” to reflect this change.

With miners getting under increased scrutiny and numerous eth developers being in favour of cutting down the reward of miners, this proposal looks genuine enough.

Buterin’s suggestion while took some by surprise has been largely met with positive reaction. It has also been believed that the huge dip in the ethereum price could also be a reason for making this announcement at the time. Currently riding at $384, a news like such can surely affect the ethereum price positively. Moreover, if this proposal moves forward, it can also encourage investors to go with ethereum.

What are your views on Buterin’s proposal to double the Ethereum hard cap? Share your thoughts with us!