by Nuno Menezes
Vitalik Buterin has sent out an April fools prank this year that left the community with some concerns. While his prank consisted of a new fixed supply proposal for Ethereum, called Fixed Supply EIP 960, he later tweeted that whether it was a joke or not, he argued if the community wanted to adopt a new fixed supply implementation then it should adopt his EIP 960 Proposal.
Every Great Joke Holds a Grain of Truth
Prank or not, the fact remains that a real debate is dividing the community and it’s centered on two fronts. On one side there are the those who believe that there should be a finite supply of ether while the other part of the community believes its supply should be infinite.
This so-called “jest” from Buterin brought on controversy and raised a sparkled discussion.
On April 15, 2018, Vlad Zamfir, a well-known programmer in the community posted an opinion article where he criticizes Buterin. Zamfir surreptitiously accuses Buterin of trying to push the community into agreeing to a limited supply of ether.
While many believe a fixed supply is an undeniable feature of cryptocurrencies as it has the specific function of preventing the free issuance of coins thus giving way to inflation, artificially market opinion as well as the intrinsic value of the token.
What is the optimal supply model for Ether?
Zamfir continues by stating that there is no optimal model for ether supply and that the developer was pushing a finite supply to serve the interest of some. He further interrogates if this model helps the community or if it serves a centralized network of investors and miners who are highly incentivized in having a fixed limit supply. Zamfir goes as far as to ask what the correct issuance of the token is and maintains skepticism regarding the digital asset’s real price.
On the following day, Vitalik commented on Zamfir’s opinion article stating that he was not in any way saying that he wasn’t open to having an infinite supply.
According to the developer, an infinite supply is something that should be carefully considered, as its implementation poses questions for the platform’s ultimate function. The most contentious being whether the token will only be used as the engine of a smart contract platform where the need of a token is always in the rise, or if participants will use the token as a store of value and a payment method.
Zamfir, reveals his opposition to the changes proposed by Vitalik as he believes it only serves the interest of speculators. It is also still difficult to understand the exact economic reality for the Ethereum token.
He argues that “The perception of scarcity of a good makes it more psychologically appealing to potential buyers.” And as such, speculators prey on those that believe scarcity will be the bridge for the future value of the token. Zamfir goes on saying:
“Indeed, the powerful behavioural effect of perceived scarcity has taken the altcoin space by storm, where nearly every altcoin is advertised with their finite supply model, and where the norm is for “scarcity-buyers” to know the supply model before purchasing. I think it’s stupid and annoying at best.”
Zamfir concludes by saying that the overall discussion is premature as the community still has a lot to learn about the economics that will apply to blockchains like Ethereum.