Ethereum is set to implement its proof-of-stake (PoS) consensus algorithm and as part of the process, co-founder Vitalik Buterin has proposed that the community adopts higher staking rewards.
Buterin made his proposal regarding the dapp and smart contract platform on GitHub on Friday, April 20.
According to him, the blockchain should have 2,097,152 ether issued on a yearly basis when staking accounts for 134,217,728 ETH. Used during transaction validation, the proposal would see network reward stakers at an annual return of 1.56 percent.
Ethereum, currently the second largest cryptocurrency by market cap, has a circulating supply of 105,764,762 ETH. It simply means that the suggested amount of ether for staking could be representative of some kind of hypothetical ceiling on the total supply.
There is more to the proposal though, with Buterin suggesting an estimate of the annual returns stakers would get when different quantities of ether are staked for transaction validation.
For example, if it happens that validators stake a total of 1 million ETH, the co-founder’s proposal would see these validators earn annual returns of about 18.1 percent.
Buterin’s proposal has been warmly received by the community, with a good number giving it a thumbs up on Reddit. To many who reacted positively to the proposal, the proposed rates are way better than those given in previous suggestions.
Per estimations given by Justin Drake, a researcher working on the Ethereum project, the implementation of PoS and sharding will see validators receive returns of around 3.2 percent when staking amounts reach 32 million ETH. The stake is equal to nearly 1 percent of Ethereum’s total supply.
Ethereum activated its Constantinople upgrade earlier this year, introducing a number of Ethereum Improvement Proposals (EIPs). Among them was the one on block rewards being reduced as the network moves towards PoS and sharding.
Now, another upgrade, EIP 1559, sets forth the prospect of burning a portion of the network’s transaction fees. The probability of this informed Drake’s recent estimation that if ETH expenditure per shard every year reaches 1,000 ETH, then network inflation would equal 0.5 percent.
In late 2018, Buterin wrote that blockchains that utilize proof-of-stake sharding could be a lot more efficient.
In March, the Ethereum co-founder noted that blockchain needed the crypto community to evolve and move with times to create systems that are both equitable and innovative.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.
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