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EIP-1559 could make Ethereum deflationary – supply discussion flares up

  • The crypto community is currently discussing the advantages and disadvantages of Bitcoin (BTC) and Ethereum (ETH) supplies.
  • Vitalik Buterin has stressed the importance of network security over having a fixed supply.

In the crypto-community, a long-standing debate between the Bitcoin maximalists and the Ethereum community has flared up again. The central problem is the lack of a fixed supply of Ethereum compared to the 21 million Bitcoin that theoretically will be mined at the end of the “mining stage”.

While it’s hard to trace the start of the debate, apparently a tweet from Morgan Creek Digital co-founder Anthony Pompliano was the trigger. However, a few days earlier Blockstream’s CEO, Adam Back, entered into a controversy that brought the Ethereum and Cardano communities closer together. Back compared the aforementioned cryptocurrencies to Ponzi schemes.

He also criticized Ethereum for having a 70% “pre-mined” supply, adding to his argument that Ethereum is a scam. In a reply to Vitalik Buterin, Back stated:

70% pre-mine and ethics are incompatible. (…) Everyone printing their own money, investing into marketing their coin is a capital mis-allocation slope leading to idiocracy.

This statement by Adam Back, a well-known Bitcoin maximalist in crypto space, summarizes the opinion of other users and like-minded personalities very well. In that sense, Pompliano’s tweet expanded the discussion on Ethereum’s supply by redirecting it towards “another problem”, the amount of ETH that currently exists. Although “Pomp” said that he does not consider Ethereum as a “bad” platform, he opposed to the idea that ETH is solid money.

To provide an exact number on the supply of Ethereum seems to be complicated. Several maximalists asked Ethereum developers, including Vitalik Buterin, but their responses were described as evasive and criticized for their lack of “accuracy”.

Developer Péter Szilágyi has been one of the most active members of the Ethereum Core to tackle the comments of the maximalists. In a series of tweets, Szilágyi stressed the exact number of the Ethereum supply would not take into account lost ETH. In addition, he provided a link to a program that offers an estimate of ETH supply.

In that line and in response to the tweet from “Pomp”, the developer Ryan Sean Adam dared to give an estimate of the Ethereum supply:

112,100,917. ETH supply is 112,100,917. The world is big enough for more than one money. BTC is money. ETH is money. Save Monday’s post for something that helps the movement. We’re not here for BTC vs ETH. We’re here to go bankless.

EIP-1559 and Ethereum’s security

While the debate remains, Ethereum co-creator Vitalik Buterin believes that attention should be directed elsewhere. Buterin has been one of the advocates for the implementation of the EIP-1559 proposal that proposes to change and improve the Ethereum’s reward mechanism. EIP-1559 and the transition to a consensus Proof-of-Stake algorithm will make Ethereum a deflationary cryptocurrency, as Buterin stated:

I love how people have been so awkwardly trying to press ethereum on its lack of a preset “21 million”-like hard cap, when transaction fees the past 2 months have been high enough to more than fully cancel out PoS rewards post-EIP 1559.

Buterin also stated that the supply of Ethereum is 112,086,970 ETH. Moreover, he stressed the importance of the network security over having a fixed supply.

I think “satisfying the sound money religion” cannot properly happen until the eth2 + EIP 1559 issuance schedule is implemented and proves its sustainability regardless.

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About Author

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Reynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

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