Vitalik Buterin Describes Ethereum To The Average People and Why It's Important

Ethereum Founder Vitalik Buterin Proposes Hard Cap of 120 million

In a surprise post on developer’s forum Github today, April 1st, 2018, almost thought to be an April Fool’s joke by some, Vitalik Buterin suggests a hard cap for Ethereum of 120 million Ether (ETH).

Ensuring Economic Sustainability

“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.”

In the Ethereum improvement proposal (EIP) Buterin goes on to suggest implementation could occur during the next Ethereum hard fork, likely to be the first phase of the Casper update. At that time all in-protocol rewards such as mining rewards, staking interest, staking rewards in the sharding system and any future rewards would be redenominated to reflect a hard cap and finite supply of Ether.

Buterin goes on to recommend setting the hard cap at twice the amount of ETH sold in the original Ether sale, which would equate to 120,204,432 coins. There are currently 98 million ETH in circulation. His second choice, taking into account any delay in implementation of his EIP, is as follows:

“If for some reason this EIP is adopted at a point where it is too late to set a max cap at 120 million, it is also possible to set a higher max cap. I would recommend 144,052,828 ETH, or exactly 2x the total amount released in the genesis block including both the sale and premines.”

For miners, if Ethereum remains with a proof-of-work model, rewards will be reduced. If Ethereum moves to a proof-of-stake model mining rewards are set to diminish regardless. The Casper update is the proposed change to a proof-of-stake model.

Answering Investor Concerns

Ethereum has been criticised for not previously setting a hard cap on the number of coins that could be issued. A criticism that some believe dims the potential of the Ether coin as an investment. An infinite number of coins can mean the value of each declines as more enter the market, in a similar way to traditional currencies.

The price of Ether has followed a glaring recent trend of declining cryptocurrency prices across the board. There are no clues yet as to whether Buterin’s proposal will gain the support of Ethereum’s core development team and be eventually implemented. The proposal, however, is significant and if it goes ahead could potentially encourage more investors to choose Ethereum.