EIP 2025 Could Destroy Faith in Ethereum
A proposal on Ethereum put forth by James Hancock has been shot down by the community. The proposal aimed to temporarily inflate supply by adding a .0055 ETH reward in each block that would be routed to an independent developers fund, which would then be used to carry out necessary development on Ethereum 1.x, July 24, 2019.
Protocol Changes Threaten Decentralization
After the DAO hack and subsequent rollback, many were turned away from Ethereum simply because developers had enough clout to convince miners to roll back the chain. The fundamental premise of a blockchain is immutability – whether it is beneficial or not.
If EIP 2025 had been passed and implemented in the protocol, it would have spelled disaster for Ethereum. This proposal essentially inflates the supply of Ethereum for 18 months by adding to the block reward and token issuance.
As an asset that relies on its deflationary economics to create value and scarcity, inflation is a dangerous addition.
At a 20 second block time, this would lead to 14,500 ETH sent to the fund in a single year. However, Hancock also specified a 1,000 ETH soft cap after which the reward would be halted and could be resumed in the future if necessary.
Many investors could lose faith in Ethereum as a decentralized protocol if this went through. Not only does it adversely affect token holders, but it also increases the likeliness of infighting and a contentious hard fork.
ZCash has been criticized for creating the protocol in a way that gives developers a portion of mined ZEC from every block. Despite their transparency with funds and their uses, the protocol has similar block reward structures as Bitcoin with block time that is four times as fast. This has led to poor performance in the last year and a half as supply outweighs demand.
The way Forward with Grants
Even the likes of Vitalik Buterin and Joseph Lubin contributed to grant issuances like Moloch DAO, that utilize the ecosystems self-interest in development to fund important projects.
Moloch DAO and other grant issuers are the right way to tap into the community’s desire to fund important projects; inflationary economics is exactly what cryptocurrency was built to overcome.