Ethereum’s civil war over capped supply and bailouts

By April 21, 2018Ethereum
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Ethereum’s civil war over capped supply and bailouts

One of the biggest strengths of blockchain technology – it majority consensus governance – can also be quite divisive.

While the cryptocurrency market has remained relatively quiet over the past month, developers and blockchain enthusiasts within the Ethereum community have been arguing over the platform.

This is nothing new, and in the interest of maintaining a decentralised blockchain, it is imperative for Ethereum developers to argue all possible courses.

However, major issues have recently risen above general debate and become polarising arguments within the community.

These concepts could dramatically alter the course of Ethereum, as they greatly affect the structure of the blockchain and its ether currency.

The bailout

Parity’s decentralised multi-signature wallets were compromised last year, after a user exploited a bug in an Ethereum smart contract and deleted the wallet’s library function.

This locked over 500,000 ether and rendered the wallets unusable.

Parity said the only way to recover the funds was via a hard fork to the Ethereum blockchain, and proposed methods to implement this.

This caused an uproar among advocates on both sides, as users had lost cryptocurrency due to the exploit.

Ethereum has a history with controversial hard forks – namely the decision to revert the DAO hack which spawned Ethereum Classic – and the Parity bailout may become another turning point for the cryptocurrency.

Those against hard-forking the blockchain are worried that the changes made to the architecture will increase the mutability of the blockchain and pave the way for transactions to be reverted in the future.

Ethereum Improvement Proposal (EIP) 867 outlines a format for requests to revert transactions, which has been labelled a “get out of jail free card” by those against the change.

On the other hand, many users lost a lot of money to the Parity bug and would love to see their funds recovered.

They argue that if most people want the funds recovered in this way, then it must be done.

Capped supply

More recently, an EIP which started as an April Fools’ joke turned into a serious debate.

On 1 April 2018, Ethereum cofounder Vitalik Buterin filed EIP 960, which states that the total supply of ether (ETH) should be capped at 120 million.

Buterin said:

“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.”

Ethereum developer Vlad Zamfir, who has been working on the Casper proof-of-stake consensus mechanism for Ethereum, then wrote a counter-argument against Buterin’s EIP, stating that participants do not know which ether supply model is optimal and that speculators want certainty about the cryptocurrency’s supply.

The two argued the point, echoing the division that has formed within the Ethereum community over the problem of fixed versus unlimited supply.

Buterin responded to Zamfir, and Zamfir subsequently responded to Buterin.

Two of the most influential figures in the Ethereum community cannot agree on whether the supply of ether should be capped, and while discourse is considered healthy among advocates of decentralisation, this situation makes the future of Ethereum uncertain.

Ethereum – like all cryptocurrencies – has always been volatile, and burgeoning governance problems in what is still its early development mean that nobody can be sure what type of platform it will end up becoming.

While the cryptocurrency market has remained relatively quiet over the past […]

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