UPDATE: The developers have just agreed to delay the ‘difficulty bomb’ which means inflation will increase by 2000 ETH a day to 13,600 at the next fork.
The new Ether supply has just dropped to its lowest level in history, falling from 12,600 to 11,800.
And within the space of a year, it may fall by 2/3rds to below the inflation rate of Bitcoin.
It’s the second drop in weeks, meaning inflation has dropped by 13% in the space of a month.
The rate was 13,500 ETH just a few weeks ago.
Barring unforeseen circumstances, or a plan to delay the difficulty bomb (which could happen on December 7 but this is yet to be stated), it looks set to continue to fall every two weeks or so.
If the current rate of decrease continues, Ether will have seen a halving of the inflation rate in about four or five months.
That’s March/April if you’re counting – so it could occur before the highly anticipated Bitcoin block reward halving decreases BTC’s inflation rate.
Bitcoin’s halving has attracted a lot of attention with people like crypto analyst Plan B using a stock-to-flow model to predict it will send Bitcoin’s price to the moon.
Ethereum however, is actually set to reduce the inflation rate by even more – by a whopping two thirds from that 13,500 ETH rate. That will bring its inflation rate to below that of Bitcoin’s.
It’s part of the preparations for the Proof of Stake upgrade, which is transitioning the network away from miners and to people staking their Ethereum instead
The exact timeframe for all this happening is up for debate.
Trustnodes this week estimated that the POS upgrade will happen in about three months after the testnet ‘with the finality gadget to then follow maybe in autumn next year’.
Based on that ‘maybe’ they estimate issuance will be reduced by two thirds around the third quarter of next year. Maybe.
The more ‘official’ information says the 75% supply decrease will happen in 2021 though.
There are a lot of unknowns – some say you can earn up to 12% by staking 32 ETH on the network. Others say you can earn bugger all.
And of course some people say that Ethereum itself is a total scam, including Bitcoin pioneer Adam Back who compared it to medical fraud Theranos.
Well, people aren’t as excited about the Ethereum halving (or ‘two thirdsing’) as no one is even certain that Proof Of Stake will work or be as secure as it should.
The price of Ethereum has been floundering recently and there is more than five times as much supply as Bitcoin: 108 million, as opposed to 21 million.
Even when the supply rate falls to below that of Bitcoin’s there’s no guarantee that the price will rise. Supply is just one side of the price equation and demand is the other.
When the Constantinople hard fork was implemented in February this year, block rewards decreased from 3 to 2, cutting the inflation rate (theoretically) by a third to around 4.5%.
The price certainly went up from $130 to $330 since February, but it’s also come back down again to around $150.
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