Ethereum Classic Forges New Path; Revamped Monetary Policy Could Be Next
The continuation of the “original,” pre-fork Ethereum project seems to be letting go of plans as established by the Ethereum Foundation, and instead navigates a distinct path forward. The development community around the smart contract platform is growing, the project developed its own policy on hard forks, and as opposed to Ethereum, Ethereum Classic will probably not switch to (full) proof-of-stake mining anytime soon.
And, in the biggest deviation since the hard fork yet, Ethereum Classic could steer toward a radical economic change: a new monetary policy.
According to Ethereum Classic’s project coordinator, “arvicco”:
“The current unlimited emission schedule flies in the face of basic tenets of Austrian economics.”
When Ethereum Classic first emerged, many wrote the initiative off as a joke, a pump-and-dump scheme, or at best a protest movement that would die off over time. Nearing the end of 2016, however, Ethereum Classic is doing better than even some of its initial proponents had expected.
Though trading volume has dropped off significantly since the early days, the classic ether (ETC) price holds relatively steady at around $0.90 per token. With that, the Ethereum Classic market cap is worth more than 10 percent of Ethereum's, securing the altcoin a #6 spot on CoinMarketCap.
And — perhaps more importantly — development efforts have progressed as well. Speaking to Bitcoin Magazine, arvicco, owner of Russian digital currency news site bitnovosti.com and one of initiators of the project, explained:
“At first, the Ethereum Classic volunteer development team was just one person, but now our GitHub includes 34 people with commit rights. In addition to that, Charles Hoskinson’s IOHK just announced it is committing a new development team to Ethereum Classic: ‘The Grothendieck Team.’ And core developer Igor Artamonov is forming a new professional team that will support core projects as well.”
Ethereum Classic also found support from notable companies and people in the digital currency space, particularly in China. Major exchange, wallet service and mining pool BTCC recently announced it will enable ETC as a trading option. The Chinese ETCWin project — a decentralized digital currency exchange — is the biggest Ethereum Classic ICO (Initial Coin Offering) to date. And Chinese investor Chandler Guo plans to bootstrap the creation of 100 Ethereum Classic dApps (Decentralized Applications) in the next three years.
On a technical level, the Ethereum Classic community prides itself on taking a more conservative approach, compared to what is described as Ethereum’s “move fast and break things” attitude, and still rejects editing changes to the ledger. As the clearest example of this policy since The DAO hard fork, Ethereum Classic did not implement the so-called “Spurious Dragon” hard fork.
Arvicco, who prefers to remain pseudonymous, explained:
“During the spam attacks that hit both Ethereum and Ethereum Classic in October, many millions of so-called ‘null’ accounts were created. These accounts don’t have a state or a balance associated with them, but they still clog the blockchain and client memory. Some within the community felt that information about these accounts — even though they are malformed and appeared due to a bug — are still part of blockchain history. So Ethereum Classic didn’t adopt that hard fork.”
Additionally, the Ethereum Classic community is deploying its own hard fork to diffuse the “difficulty bomb” in January. This difficulty bomb — originally implemented by the Ethereum Foundation — is set to increase Ethereum’s mining difficulty exponentially over time. This ensures that mining becomes unprofitable, effectively “freezing” the protocol so it can no longer be used. The Ethereum community will have to hard fork to a new version of the protocol, perhaps to introduce proof-of-stake mining: The bomb is designed to force their own hand.
But since Ethereum Classic is in no rush to switch to proof-of-stake mining, there is little need for the community to force its own hand; rather, it deems the difficulty bomb useless — even risky.
But the biggest diversion away from Ethereum so far could be an upcoming change to Ethereum Classic’s monetary policy.
Ethereum’s emission schedule releases a stable amount of new tokens each year. The project started off with a 72 million ether premine, allocated to presale investors, the Ethereum Foundation, and developers. Since then, about 13 million new ethers are mined each year; theoretically forever.
Continuing on the pre-forked chain, Ethereum Classic has an identical initial distribution and inflation schedule. But this could soon change.
“A monetized platform token is a key component of a blockchain system. Its function in the system is to align the economic incentives of all the key stakeholders: investors, users, miners and developers,” said arvicco, explaining the rationale behind a potential adjustment. “In order to achieve monetization, an asset, first of all, needs two preconditions: utility and scarcity. With the inflation on the Ethereum blockchain, there will be a lot of tokens at any rate, and from a practical standpoint no token scarcity at all.”
The leading proposal to replace the current monetary policy is ECIP-1017 (Ethereum Classic Improvement Proposal 1017), drafted by Matthew “snaproll” Mazur. Much like Bitcoin's situation, ECIP-1017 would put a hard cap on the total amount of tokens to be issued. Specifically, it is “tithing” a 20 percent reward reduction about every 2 years, so the supply will level off at some 200 million ETC around the year 2070 — with a hard cap of around 210 million ETC. The first tithing should occur at the 5 millionth block, scheduled to be mined a little less than a year from now.
But ECIP-1017 — which requires a hard fork — does not have consensus quite yet. And whether the community will be able to reach consensus on such a substantial change, of course, remains to be seen.
“We are doing trying to reach and measure consensus to the best of our abilities, and so far the sentiment is predominantly supportive of the change. But there is only one ultimate measure of community agreement: for developers to offer code, and for the community to run it,” arvicco said.
As part of an effort to reach consensus, the Ethereum Classic community is organizing a meetup to discuss monetary policy in London this evening. Panelists include founding director of the Bitcoin Foundation, Jon Matonis; digital currency angel investor, Alistair Milne; Epiphyte CEO & Founder Edan Yago; and director at the British Bankers Association, Matt Herbert.