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Ethereum Proof-of-Stake: What Will Result In The Reduction Of Miners Award

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In the nearest future Ethereum cryptocurrency will change the algorithm of consensus and reduction of miners award from 3 ETH to 2 ETH.  

Ethereum continues to strengthen its position thanks to its unique development ecosystem, on the basis of which creates decentralized applications. This innovative approach of Ethereum has already proved its effectiveness in practice and is unequivocally confirmed by attention from such giants of the development industry as Microsoft. In this ecosystem - a software platform based on blockchain and the main difference of Ethereum from other cryptocurrencies.

Recall that Ethereum has a unique model of the algorithm of consensus among all the cryptocurrencies. It combines two ways, and in a special, original way: the network began to function with the classic Proof-of-Work, through a series of hardforks gradually moving to Proof-of-Stake. Such a mining model has several advantages:

  • beginning with the classic algorithm gave fuel for a quick start to the currency and time to close the raw bugs then still Proof-of-Stake;
  • the transition to Proof-of-Stake will give an opportunity to seriously save on electricity in the mining centers, as serious energy-consuming calculations do not require this model;
  • the so-called "arms race", inherent in the standard mining, no longer makes sense, although there remains the risk associated with the accumulation of a large sum of coins in the same hands;
  • an attack of 51% becomes inexpedient, because, firstly, when you try to buy a large amount of coins, the market reacts with a sharp increase in price, and secondly, there is no sense in attacking the network, half of which is your own money.

Metropolis: two hardforks and miners award reduction from 3 to 2 ETH

Metropolis is the next hardfork, which is implemented in two stages: Byzantium and Constantinople. The first stage of this part of the road map has already been passed: the Byzantium was introduced in October 2017, the second stage is planned for the fall of 2018. So, the reward for the miners block will soon drop to 2 ETH.

Metropolis will be the very starting point for launching a new algorithm in Ethereum network, and following this autumn the number of existing ETH-miners may radically change. The result of these changes will be the beginning of the network operation on the basis of the hybrid protocol PoS/PoW, also called Casper FFG - just after the completion of the Constantinople phase.

The forecast of market movement against the background of these news

Reducing the award of miners to 3 ETH at the Byzantium stage has already led to the analysts expected drop in emissions from 14.75% to 8%, which, in turn, naturally leads to an increase in the rate of Ethereum. Experts believe that there is no reason for a sudden change in this trend and the situation is likely to repeat against the news of the successful completion of the Constantinople stage.

The transition from Proof-of-Work to Proof-of-Stake will lead to a number of changes that may seem unobvious without careful consideration. The network will certainly benefit from the transition, since huge energy costs for maintenance of the mining centers will not be needed. At any moment ETH rate can once again turn around and go up.