Ethereum To Mitigate High Circulating Supply Issues

in #ethereum6 years ago

Ethereum's circulation supply reaches $100M, may dilute its value due to oversupply


Image Source: pixabay - WorldSpectrum

Ethereum's blockchain is the core for many ICOs, smart contracts and ERC20 tokens including EOS, TRON and almost all upcoming blockchain projects. TheNextWeb - Neer Varshney raises several concerns over the amount of Ether in circulation.

Unlike Bitcoin which has its supply capped at 21 million, Ethereum has opted not to set an upper limit on its total coin supply. This has raised concerns about inflation in the Ethereum community for years on end.
Source: TheNextWeb - Neer Varshney

Even though an Ethereum Improvement Proposal (EIP) was opened by Vitalik Buterin on April Fool's Day, there were sufficient legit concerns highlighted:

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.
Source: github - ethereum

Vitalik proposed a hard cap at $120 million for circulating supply and that block rewards should gradually decrease until it reaches zero, with a half-life of 744 days. There is general support from netizens although some questioned why a hard cap was not set in place on Day 1 as compared to Bitcoin with a limit of 21 million tokens.

This is clearly a supply and demand situation. If the supply outstrips demand, the value of Ethereum may drop further and that would be really bad news for HODLers. Ethereum prices may not hit the highs that we have witnessed in Jan 2018 at $1400. Ethereum continues to compete with Bitcoin hovering at No. 2 position in terms of market cap.

Changes in the circulating supply introduce a price change as circulating supply directly affects the price of the coin. Tracking the circulating supply is the finest way to estimate the demand for a cryptocurrency. As per the market calculations, the lower the circulating supply, the higher the price. Source: ambcrypto - Ranjitha Shastry


Image source: pixabay - TheVirtualDenise

Moving towards Proof-of-Stake will rectify the issue
Ethereum's implementation of the PoS consensus Casper protocol is likely to reduce the circulating supply as the protocol is already set in motion. Also knowing that many of the top successful blockchain projects are built on Ethereum, boasts a strong developer backing of 250,000 people. Having said that, Ethereum is definitely under-valued. Hence as circulating supply starts to decrease over the next few months, prices of ETH will be on the upward trend.

“You simply cannot build excellent applications and products without a big developer base behind you. But today, Ethereum has roughly 250,000 developers building on its platform. ... Ethereum’s development framework called Truffle already has more than 500,000 downloads and even though the price fall of 2018, development interests have continued to rise,” said Kevin Rooke, a cryptocurrency researcher.
Source: CCN - Joseph Young

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Yes, in my opinion this sounds as an concern because when supply exceeds than the demand then also it's called the unproductive business and this is not good at all because most of the smart contracts are hold by the Ethereum Blockchain so this is an concern on which the team have to think upon.

And second concern in my opinion is, as per Blockactivity Ethereum stands on second number below the Steem but yet Etherium almost used it's Block Space and Transactions are slow, and i hope that the team will come up with the solutions soon.

Thanks for sharing this post with us and wishing you an great day. Stay blessed. 🙂

Thanks for the comment :) I hope Casper network comes online soon

Welcome. 🙂

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