Should there be less supply in ETH? Vitalik thinks so.

Vitalik Buterin, the cofounder of the Ethereum blockchain and ETH, one of the foremost cryptocurrencies after bitcoin, just recently gave an interview to Bloomberg.

What did he talk about?

The 23 year old digital currency co founder is seeing all these projects with their various respective digital currencies and is wondering if there is an excessive supply of ether.

Why?

Well, according to a report from Bloomberg “There’s a hard limit — 21 million coins — on the supply of bitcoin, the first successful cryptocurrency, that helps underpin its value. Buterin isn’t mulling a cap like that, but he’s intrigued by the idea of imposing fees on applications built atop ethereum. Those fees would destroy — or burn, in Buterin’s parlance — ether tokens over time.

“If the token is being burned, then you have an economic model that says the value of the token is the net present value of basically all future burnings,” he said. Otherwise, “it’s just a currency that goes up and down. It feels kind of like voodoo economics and the price of the token isn’t really backed by anything,” Buterin added. “That’s a very spooky thing.”

A very spooky thing indeed. Where bitcoin has a specific hard cap limit, there is no limit to the ether. The lack of scarcity in Ether and lack of anything really backing it has Vitalik wondering what must be done. Instead of setting a hard cap for ETH, Vitalik is more focused on introducing some sort of fee or other mechanism that would regulate supply. The other mechanism that could possibly be a solution would be the “proof-of-stake plan” which may be implemented by the end of this year. The proof of stake plan would incentivize users to lock up a certain amount of ether for some time, helping to minimize supply and keep things steady.  The larger the amount of ether that the user opts to lock up the larger his/her potential incentive.

Vitalik expressed concerns in regards to the many ICO’s that are being placed on to the market and being able to raise significant amounts of capital prior to the development of the product.

Buterin states “I’m concerned a lot of these token models aren’t going to be sustainable,”.

He believes that there should be some sort of milestones, ICO money release would be then tied to milestones being met.

If more are able to raise the infusions of capital upfront, how does one account for the potential lack of deliverables, how does the raised capital get redistributed back to the contributors? Does it get distributed back to the contributors? Refunds and accountability are the topics that are swirling around in the mind of the young Vitalik and he’s not the only one. The US Securities Exchange Commission, central banks and many others are watching the space and making calls on a regular basis as to how they treat cryptocurrencies and mechanisms like the initial crowd offering process that have been rather rampant as of late.

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By | 2017-11-09T22:59:10+00:00 November 9th, 2017|News|0 Comments

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