Miner Argument Continues Over Ethereum's Byzantium Economics

The question of how ethereum is incentivizing miners is developing ahead of an expected hard fork on the platform this month.

AccessTimeIconSep 25, 2017 at 7:15 p.m. UTC
Updated Sep 13, 2021 at 6:57 a.m. UTC

A dispute between some ethereum developers and miners is continuing to simmer over the specifics of a coming upgrade designed to improve the network's functionality.

The discussion, which has been underway since at least July, currently concerns an ethereum improvement protocol, EIP 649, intended to reduce the time it takes to "mine" a transaction block, a process for which miners are rewarded with the creation of new ether, the platform's native cryptocurrency.

Key to the dispute is that, after the migration, nicknamed "Byzantium," blocks would be mined in about 10 seconds faster than they are today. But, to ensure that this does not deflate the value of ether, currently valued at around $300, the code patch also lowers the reward miners receive per block from 5 ETH ($1,200) to 3 ETH ($840).

Stepping back, the change can be seen as a response to long-controversial code in the ethereum protocol called the difficulty bomb.

An incremental increase of difficulty, pre-configured into the protocol, the difficulty bomb is designed to make blocks steadily less time-efficient to mine. But while the code is intended to incentivize miners to switch to a different chain in the case of a fork, critics fear that, combined with the decline in block reward, it could have the opposite effect.

As the change will impact different stakeholders in different ways, it's hard to get everybody on board with the idea. Some commentators have gone so far as portraying the EIP as an attack on miners with the resources to mine harder blocks with greater rewards.

At press time, the argument continues, though it remains unclear whether the posts represent a material number of stakeholders, and if they do, how their acknowledgment might shift the conversation around Byzantium, currently planned for late October.

The dispute can also be seen as a continuation of the conflict surrounding an older protocol update, named EIP 186. Detailed by CoinDesk earlier this year, the EIP suggested reducing the block award to combat inflation of the currency – a code patch which was widely accepted by the community, and as a result, informed the current EIP.

Still, such semantics could emerge as a topic of interest ahead given the mechanics of the Byzantium upgrade. At the time the new code is introduced as a hard fork, miners will be able to choose to switch to the new blockchain with the new rule set, or continue mining the older version of the blockchain.

Of note is that a similar split happened in 2016, when following a disagreement, certain miners refused to leave the old blockchain, continuing to mine a currency now called ethereum classic (ETC).

Crakced cement image via Shutterstock

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