Vitalik Buterin, founder of Ethereum, which until this week was the second-highest crypto-asset by market cap (See What’s Up With Bitcoin and Bitcoin Cash for the scoop), granted a rare interview where he voiced concerns about the Ether world he helped create.
According to Bloomberg, while at the annual Devcon event in Cancun Mexico during the first week of November, Buterin expressed that he “was concerned” many of Ethereum’s token models “aren’t sustainable”.
A Modest Proposal 2.0
Bloomberg suggests that Buterin may have created too much of a good thing. The Bitcoin crypto-asset is capped at no more than 21 million tokens that are slowly released into the market, so there’s a finite amount and the market value won’t be diluted.
The number of Ethereum tokens are essentially capped at the current circulation of just over 96 million.
In order to prevent Ethereum from venturing into “voodoo economics” territory, Buterin suggested:
Introducing some kind of sinks into ethereum is definitely something we’re looking at. By sinks, I mean fees that lead to the token actually being destroyed.
This would, similar to Bitcoin, create scarcity and thereby keep the value of Ethereum high.
A second method that could be utilized is to cordon off or “lock up” Ether to remove it from circulation. This is a plan, he went on, that would occur when the community moves away from their current proof-of-work verification process to a system known as proof-of-stake. Miners would essentially be required to deposit Ether tokens in order to participate in the mining or verification process. The more tokens deposited, the more they earn.
Buterin also addressed the pros and cons of ICOs. He stated, as have others, that projects should have a working prototype or product before they should be allowed to collect millions of dollars through an ICO. Another recommendation stated involved either instituting an ICO as a “process” instead of a single event, or providing for refunds should the venture fail.
. . . The right way to do [ICOs] is to come up with a mechanism that either splits the ICO up across rounds or has a mechanism where if it doesn’t go well people can get refunds or anything similar.
All of this is good news for any investor in Ethereum or any Ethereum project as well as future ICOs.