jebmo’s posthaven

Author: Vitalik Buterin
Category: Meta
Published: 2018 Apr 1

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.

During the next hard fork that alters reward distributions (likely phase 1 Casper), this proposal requires redenominating all in-protocol rewards, including mining rewards, staking interest, staking rewards in the sharding system and any other future rewards that may be devised, in "reward units", where the definition of reward units is:

1 RU = (1 - CURRENT_SUPPLY / MAX_SUPPLY) ETH

I recommend setting MAX_SUPPLY = 120,204,432, or exactly 2x the amount of ETH sold in the original ether sale.

Assuming MAX_SUPPLY = 120 million, and given the current supply of 98.5 million, that means that 1 RU is now equal to 1 - 98.5m/120m ~= 0.1792 ETH, so if a hard fork were to be implemented today, the 3 ETH block reward would become 16.74 RU. In one month, the ETH supply will grow to ~99.1 million, so 1 RU will reduce to 0.1742 ETH, and so the block reward in ETH would be 16.74 * 0.1742 = 2.91555.

In the longer term, the supply would exponentially approach the max cap and the rewards would exponentially approach zero, so if hypothetically Ethereum stays with proof of work forever, this would halve rewards every 744 days. In reality, however, rewards will decrease greatly with the switch to proof of stake, and fees such as rent (as well as slashed validators) will decrease the ETH supply, so the actual ETH supply will reach some equilibrium below MAX_SUPPLY where rewards and penalties/fees cancel out, and so rewards will always remain at some positive level above zero.

If for some reason this EIP is adopted at a point where it is too late to set a max cap at 120 million, it is also possible to set a higher max cap. I would recommend 144,052,828 ETH, or exactly 2x the total amount released in the genesis block including both the sale and premines.