Will Lowered Block Rewards Cause Ethereum to Split?

written by

Will Lowered Block Rewards Cause Ethereum to Split?

Support free journalists: > send a tip

Ethereum’s developers have decided to lower mining block rewards to 2 Ether, from the current reward of 3 Ether or a 33% reduction. This was decided during a 31 August developer meeting and will be implemented when the Constantinople hard fork takes effect. The hard fork is designed to smooth the transition from proof of work to proof of stake and when that happens Ethereum mining will become a thing of the past.

Ethereum mining was already quite unprofitable before this decision. Ether’s price has declined from a peak near USD 1,400 in January 2018 to less than USD 300 in August and continuing into September. Simultaneously, Ethereum’s mining difficulty has generally been increasing. The combination of drastically decreased price and increased difficulty is a recipe for Ethereum miners to go out of business, since it costs more electricity than the revenue produced from mining. Ethereum miners have been liquidating their rigs on peer-to-peer trading apps like LetGo.

The decision to cut Ethereum’s block reward at such a time would be welcomed by investors and indeed, price is up nearly 10% since this decision was made. Miners may have been made unhappy, however.

When Ethereum implements the Constantinople hard fork, miners will have the choice to keep mining the older version of Ethereum and this is likely to happen to some extent. It is unknown how many miners will split off and choose not to upgrade when the Constantinople hard fork occurs. The developers are quite explicit with their intentions, which is to eventually get rid of proof of work mining. This would be the time for Ethereum miners to make their stand.

Ethereum is also planning a hard fork every eight months and is guaranteeing this by programming a difficulty bomb into their code. After 12 months, its difficulty will begin to rapidly increase, leading to an ‘ice age’ where no more Ethereum blocks are mined. This forces the Ethereum developers and community to produce another hard fork before that happens.


Follow BitcoinNews.com on Twitter: @bitcoinnewscom

Telegram Alerts from BitcoinNews.com: https://t.me/bconews

Want to advertise or get published on BitcoinNews.com? – View our Media Kit PDF here.

Image Courtesy: Pixabay

Help spread this article :)


Opinions expressed are entirely their own and do not necessarily reflect those of BitcoinNews.com

For informational purposes only. Individuals and entities should not construe any information on this site as investment, financial, legal, tax, accounting or other advice. Information provided does not constitute a recommendation or endorsement by BitcoinNews.com to buy or sell bitcoin, cryptocurrencies or other financial instruments. Forecasts are inherently limited and cannot be relied upon. Do your own research and consult a professional advisor. The opinion of authors do not reflect those of BitcoinNews.com 


Latest on Bitcoin News