Ether’s co-founder, Vitalik Buterin, explains the decision behind reducing the supply of ETH 2.0
Ethereum 2.0. This term is used to describe altcoin ETH, only after a number of changes and updates to improve this crypto network. The most important change that the update to the Ethereum network introduces is a solution to the scalability problem.
Reasons for reducing emissions
Ethereum’s co-founder, Vitalik Buterin, speaks about reducing emissions of ETH 2.0, discussing the differences between Bitcoin (BTC) and Ethereum (ETH) and explaining why they chose Proof Of Stake (POS) as an improved consensus algorithm.
One of the reasons why Ethereum decided to introduce POS is that they want to reduce the issuance of tokens. The team calculated that this year’s maximum issuance would be around 2 million coins, and currently, the Ethereum network is spending 4.7 million ETHs per year, with ETH 2.0 set to be between 100,000 and 2,000,000,000 coins per year, where the likely scenario will be much less than its maximum.
Destruction of tokens to reduce supply
The co-founder of Ethereum also mentions that part of Ethereum 2.0 will be “burnt”. He explains that the total supply of ETH 2.0 may decrease in value during a large volume of transactions due to the ‘burning’ of the fee. This is because the protocol charges a basic fee when you execute a transaction and the fee for it is split into 2 parts. One goes to the miner as a “tip” and the other is destroyed. In this way, the supply will be reduced and the scalability of the network improved.
Crypto analyst Adam Cochran believes that the Ethereum’s transition to Proof of Stake (PoS), the simplest cryptocurrency mining algorithm where energy efficiency is a priority, could cause a powerful supply shock to Ethereum. He believes that rewards for digging of 3-5% of the capital will encourage large investors to enter.
An important variable that will come into effect with the improvement of Ether’s network is the new size of the block. As Buterin says: “Instead of volatile trading fees, a volatile block will be introduced.” This is intended to help ETH users, who have difficulty predicting the optimal amount per transaction and excessive processing time, and thus improve network scalability.
Release date of Ethereum 2.0
As you can see, Vitalik and the Ethereum team are working hard to make the network improvements as good as possible, but we don’t know when the new network will come into force. The premiere of ETH 2.0 was supposed to take place in January 2020, and then we were informed it will happen during the second quarter of this year. In the end, we don’t know when the premiere will take place, but it will certainly cause quite a stir on the crypto scene.