Does Ethereum halve every four years?
Crypto

Does Ethereum halve every four years?

By Marco Cavicchioli - 17 Feb 2019

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Does Ethereum protocol also include halving?

The Bitcoin protocol provides that every 210,000 mined blocks the prize for minerals will be halved, and has already happened twice: in 2012 and 2016, which is about every four years. The next one is scheduled around May 24, 2020.

Ethereum, on the other hand, does not envisage halving the mining awards at fixed intervals.

On the contrary, if the halving of Bitcoin sooner or later will completely reset the awards for miners, this could never happen for Ethereum.

Since the prizes are awarded by creating new tokens, and since BTCs are only created in this way, when the rewards are zeroed new BTCs will never be created again and their total number in circulation will remain fixed.

does ethereum halve

This is what is called the deflatory nature of bitcoins, also because over time some BTCs will inevitably be “lost”, so in reality when no more new tokens are created the number of BTCs actually in circulation will decrease.

Ethereum, or rather Ether, the cryptocurrency of Ethereum, does not have a deflatory nature, but an inflationary one. In short, you will never stop issuing new ETHs. According to some forecasts, the inflation rate of the circulating supply of Ether will tend to approach a rate of 1% by the 64th year of its existence, that is in about 2078.

However, this does not mean that rewards will not decrease.

Every now and then they rewards are reduced, as the growth graph of ETH’s circulating supply shows, even though this is not predetermined, and we do not know of how much premiums will be reduced every time. In Bitcoin the problem does not arise, because halving is predetermined and is an integral part of the protocol, while for Ether the decisions of when to reduce the premium, and how much to reduce it, is made over time.

The theoretical objective of aiming at that 1% inflation rate of the above mentioned circulating supply, may not necessarily require the reduction of premiums. By constantly increasing the circulating supply, the ETH reward remains fixed, as inflation rate is mathematically reduced without having to intervene directly. But sometimes developers feel they have to intervene and so they can decide to reduce the rewards.

Obviously, when this happens, the miners often disagree, so they are not easy decisions to make, and that can even lead to a fork, as happened for example for Ethereum Classic.

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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