Ethereum 2.0 is expected to be one of the most important technical upgrades in the blockchain space ever.
Speaking to Token2049’s 2019 iteration in front of a crowd of thousands, Vitalik Buterin — founder of the blockchain — said that he expects the upgrade to turn Ethereum into a “next-generation blockchain” that will be hundreds of times faster and more functional than the current iteration.
Exciting, for sure, but what many fail to forget is that the blockchain upgrade will also irreparably change Ethereum’s monetary policy, which has long been scrutinized as the black sheep of crypto monetary policies.
According to Buterin, who spoke on the matter in a recent interview, the inflation rate of Ether could fall by upwards 50% as the upgrade rolls out.
Ethereum’s Inflation Could Plunge After 2.0 Rollout
For the longest time, Bitcoin maximalists have lambasted the Ethereum community for ETH’s variable and relatively easy monetary policy.
Unlike BTC, whose monetary base is controlled by a public formula integrated by Satoshi Nakamoto, the inflation rate of ETH has long been somewhat variable, changing over the months in no predictable fashion due to “difficulty bombs” and changing block rewards.
The introduction of the staking consensus mechanism through Ethereum 2.0 will ensure that while the inflation rate of the cryptocurrency’s supply will remain somewhat variable, it will be much lower than it is now.
In an episode of POV Crypto Podcast titled “Internet Money,” Buterin explained:
“One of the reasons why we’re doing Proof of Stake is because we want to greatly reduce the issuance. So in the specs for ETH 2.0 I think we have put out a calculation that the theoretical maximum issuance would be something like 2 million a year if literally everyone participates.”
For some context, two million coins minted per year will result in a more than 50% drop in the inflation rate of Ether, and that’s the “worst-case scenario.” There’s a good chance that staking will issue less than one million coins per year, slowing the growth of the cryptocurrency’s supply dramatically.
For those unaware, Ethereum 2.0 staking is the process that will replace the mining of ETH blocks. Staking requires dedicated users to commit their coins (at least 32) to the staking process, for which they will receive slight rewards (expected to around 4-5%) for their commitment.
Could Boost Ether Prices In Long Run
Considering the strong reduction that will come to Ether’s monetary base once Ethereum 2.0 is rolled out, many have started to speculate as to the effects the upgrade will have on the price of the cryptocurrency.
According to Adam Cochran, a partner at MetaCartel Ventures, the introduction of staking will see investors rush to buy 32 Ether to earn a return on their holdings. He estimated that 10 to 30 million Ether could be taken off the open market, resulting in a dramatic supply shock that will likely drive prices higher, he explained.
Cochran added that with the technical benefits making Ethereum much more usable, demand for the cryptocurrency should increase, creating a positive demand shock that will add to the effects of the supply shock.
Ethereum 2.0, at least its first phase (called phase zero), is currently a few months away. Justin Drake, an individual leading much of the development on this upgrade, mentioned June 30th as a possible date for the rollout of the first phase.
With Prysmatic Labs rolling out the “Topaz” testnet to much adoption and accolades from the Ethereum community, this launch date seems plausible.
The post Vitalik Buterin: Ethereum 2.0 Will Drop ETH’s Inflation By Over 50% appeared first on Blockonomi.
May 01, 2020 at 12:40PM https://blockonomi.com from Blockonomi https://ift.tt/2Slbv7h
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