Ethereum to be Capped at 120 Million?

Ethereum to be Capped at 120 Million

 The innovative co-founder of Ethereum, Vitalik Buterin has proposed something, what seemed to be a shock to the cryptocurrency world – to limit Ethereum’s production. The proposed number was 120,204,432, twice the amount originally sold in 2014, which was exactly 60,102,216.

Vitalik made the announcement on GitHub, a forum for developers on April 1. This updated Ethereum improvement proposal (EIP) sets the cap on the supply of Ethereum to 120 million. This was a vast change to the original issuance of Ether, capped at 18 million every year.

Buterin never addresses monetary policies in public, but a good enough reason has been given by Buterin in the announcement which stated:

 “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.”

One of the economic sustainability reasons is Ethereum replacing the proof-of-work model with a proof-of-stake algorithm called Casper. Casper is one of Buterin’s innovations that overcomes the current algorithm, which is resource intensive and relies too much on miners. Casper is reported to revolutionize the network.

Bitcoin, on the other hand, has always been capped at 21 million from the initial stages by Satoshi Nakamoto. This created a market of scarcity when more Bitcoins were mined. On January 13, 2018, Bitcoin was marked to have 80% of the supply mined which was 16.8 million Bitcoins. Meaning only 4.2 million Bitcoins were left.

Currently, there are 98 million plus ETH in circulation, according to CoinMarketCap. Hence, there will be only around 2,200,000 left for mining if the proposal is implemented. However, if this proposal is adopted at a point when too late to set the cap to 120 million, it will be increased to 144,052,828 ETH.

With limitations taking place, the value of Ether coin as an investment is bound to rise together with the decrease of supply. However, this is a proposal which Ethereum’s core development team will have to agree on in order for it to be implemented. Being implemented, it will lead to new investors who will appreciate Ether coin as an investment.

Edit: Vitalik later clarified on Twitter that the proposal was a meta-joke, however, that it might not be a bad idea after all.

Image Source: “Flickr”

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