Despite falling prices and endless scalability issues, the Ethereum Protocol continues to generate massive revenues for network miners. The figures of a report confirm $ 2.5 billion a year.
Ethereum Miners generate a lot of capital
According to an analysis by TrustNodes, the revenue from mining accounts for about 8.3 percent of Ethereum’s market capitalization, which is about $ 30 billion.
According to the report, on August 11, miners received over $ 6.6 million in block rewards and mining fees. Spread over 365 days, the numbers add up to over 2.36 billion dollars. As the ether rate increases, so does the value.
Ethereum’s inflation was also calculated at 7.3 percent, twice that of Bitcoin, which paid $ 12.7 million to miners the same day. Bitcoin’s annual payout for miners is over $ 4.5 billion or just four percent of total market capitalization.
Regarding Ethereum’s significant rate of inflation, the report considers the protocol’s decision to delay the “Difficulty Bomb” as a factor. This is an upcoming program update to help combat the growing threat posed by ASIC miners by moving the system to a proof-of-stake protocol.
However, the long-awaited Casper update is expected to be introduced in mid-2019. Thus, the so-called Difficulty bomb is postponed indefinitely and the total amount for ethers remains unknown for the first time – factors that lead to high inflation.
Ethereum emission problems
Prior to Casper, Ethereum had not expected a total of more than 100 million ethers. However, according to CoinMarketCap, the current amount is 101.3 million ethers. Reduction of this emission has been proposed by Ethereum developers to keep inflation in check.
In order to reduce uncertainty about the maximum supply, four different proposals have been made: increase the block reward to 5 ETH (thereby increasing inflation to 14 percent), stabilize the current block reward of 3 ETH, reduce to 2 ETH and finally reduce the reward on only 1 ETH.
Of these proposals, a 1 ETH block bonus received the most resonance in the Ethereum community, with 65,000 ETH members voted to reduce the block reward to a lower value. If implemented, inflation would drop to 2.3 percent. Bitcoin will reach the “annual inflation rate” only by halving in 2020.
Less incentives at the expense of security?
Some miners complain about low rewards, as the measure would mean lower earnings, but by reducing the maximum supply of ether and officially limiting its number, a rise in the price of ETH can be expected. But such economic considerations are of lesser priority than the consideration of whether Ethereum’s block reward is sufficient to ensure security.
Compared to Bitcoin, ETH’s transactions are $ 365 million a day versus Bitcoin’s $ 4 billion. A respective mined block is worth about $ 80,000 at Bitcoin, as opposed to $ 1,150 at Ethereum. Bitcoin, however, has a block time of 10 minutes, while ether only takes 15 seconds.
Against this background, a block premium of 2 ETH seems to keep inflation in check, to provide sufficient incentives and to balance the diverse needs of the Ethereum platform.
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