Monday, December 5, 2022

Vlad Zamfir Calls Ethereum’s Fixed Supply Discussions ‘Premature’

Vlad Zamfir Calls Ethereum’s Fixed Supply Discussions ‘Premature’

Vitalik Buterin’s recent April Fool’s “meta-joke” EIP 960 — a non-suggestion suggestion to cap ether’s supply at ~120 million — was intended to generate debate about whether the improvement proposal was “real” or not. Ceci n’est pas une pipe, right. As community discussions have ensued, Ethereum developer Vlad Zamfir has now chimed in, saying calls to cap the ether supply are “premature.”

Also see: John McAfee Triples Down on Bitcoin Hitting $1 Million by 2020

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The Context

Ethereum co-creator Vitalik Buterin went metaphysical for this year’s April Fool’s Day prank, highlighting that his jestful supply cap EIP was still very real in the sense that “the words actually were written” in GitHub:

Two week’s later, the proposal has, unsurprisingly, generated much discussion in the Ethereum ecosystem, with notable voices in the community falling down on both sides of the argument, i.e. setting a cap or not/waiting.

Along side others like Ethereum developer Nick Johnson, Casper researcher Vlad Zamfir has now staked out his position in the “nay” camp — or has seemingly staked out his position, since one can’t be too sure with Zamfir, a self-described “Absurdist” and “troll” that would surely have no problem playing devil’s advocate. Zamfir’s listed out his thoughts against a cap in a new Medium post entitled “Against Vitalik’s fixed supply EIP (EIP 960).”


Zamfir: ‘We Don’t Know What … Is Optimal’

The crux of Zamfir’s argument is twofold: 1) there’s no clear, pressing need to hammer out a fixed supply cap this early on, and 2) it’s not clear what the optimal amount of ether issuance would be as yet.

As Zamfir explained:

“Do we know what public goods we collectively will be willing to issue ETH to fund? Can we forecast the cost of those goods today? Is it more or less than 22M ETH? Are there publicly beneficial supply numbers? Can we predict the optimal supply of ETH far into the future?

I think the answer to all of these questions is no, we don’t know.”

Later on, the Ethereum developer described another aspect of his opposition to a hard cap being selfish speculators:

“I think there two reasons that they want it:

  1. They don’t want their ‘investment’ to ‘be diluted’
  2. They want to create the perception of scarcity

Both of these desires are selfish, in that they would gain at the expense of others.”

Zamfir conlcudes that “given the current state of our knowledge” it is best to set no cap in the interim.

As for his second listed point, some have since countered that a fixed supply cap wouldn’t create the “perception” of scarcity, but actual scarcity.

Vitalik’s on the Flip Side

Zamfir’s argument provides a counterpoint to Vitalik Buterin’s position, which falls on the other end of the discussion’s spectrum. He suggested as much in the aftermath of April Fool’s Day, wherein he argued a fixed supply has its merits:

Buterin’s moved toward the position that transaction fees, not inflation, should be the way forward. He noted this shift in a recent debate with the aforementioned Nick Johnson.

“I don’t think transaction fees have to be the thing that supports the blockchain,” Johnson posited during the discussion. “If we need some amount, x eth a day to incentivize miners or stakers, you can take that from inflation or fees.”

In response, Buterin said:

“I used to think this way. The problem is, as Vlad keeps pointing out, that if you do that, basically every ERC20 token becomes a better store of value than eth. [Note: author’s hyperlink, not Buterin’s]

If eth becomes this unique token inside of ethereum that has the anti-privilege of being inflated to pay for security expenditure, and you have the ability to just print ERC20s on top of ethereum and market them, and these tokens don’t have this disadvantage, then it may well be the case eventually there is going to be this tragedy of the commons where, even though eth is necessary for network security, no one wants to support eth.”

So it’s fair to say there’s healthy debate on the topic among Ethereum’s thought leaders, and there’s no immediate resolution in sight.

Though as Zamfir seems to suggest, the topic might be a can that’s best to kick down the road for now.

What’s your take? Do you agree with Zamfir or Buterin on a fixed supply? Sound off in the comments below. 

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