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Ethereum to Cut Block Reward by 33% After Constantinople Fork

Ethereum developers seem to push to stop the Ether price drop. At a recent meeting, they agreed to reduce block reward by 33% – from 3ETH to 2ETH – after the Constantinople hard fork next month. The consensus is not expected to be finalized until the fork actually occurs and stakeholders upgrade their software accordingly.

So far, not much resistance has been seen from the Ethereum community since the Aug. 31 meeting. This indicates a show of support for the reduction in issuance which could see Ethereum avoid Bitcoin’s situation by discouraging unnecessary number of miners.

There is also the “less supply higher price” factor – ETH has dropped from almost 0.1 BTC to about 0.04 BTC falling more than double Bitcoin’s decline after December’s all-time high. A cut in miners’ reward favours ETH holders as there will be a decrease in Ethereum’s current money supply growth rate which is ~7.4%. If the change goes through, it will reduce to between ~4.8 and 4.9%, meaning there will be less money needed from holders to keep ETH price stable.

However, while it may not be said to affect the entire community per se, small miners may find the move a bit unsettling as it will reduce their incentive to secure the Ethereum blockchain. Less block reward will also likely lead to more ASIC mining control. That is, if the move makes many small miners to quit, major miners such as Bitmain – pointing toward a centralized arrangement – may win since ASIC manufacturers would remain competitive. It has fueled suggestions that apart from running the network, these major miners are likely to be higher stakers when PoS comes around – the community will be discussing a PoW change in an upcoming hard fork.

A problem
Has the outcome of the change been fully understood? This is the question those who think not much has been done to determine the impact of the proposed change but just a general belief that less issuance will lead to price rise while still maintaining the security and decentralization of the network from attacks have been peddling. Whereas, there are several other factors that can affect ETH price. They include the conduct of ASIC miners if they gain control of the network, rise in transaction fees if ETH price rises and a probable lowering of gas limit by the miners.


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