The Ethereum POS pledge proposal proposed by V God is unreasonable?

The maximum rate of return on POS pledge is 18.1%.

In order to ensure the normal operation and safety of the blockchain network, Ethereum will reward miners (pledgers).

In the PoW (Proof of Work) stage, the awards given to the miners by Ethereum are mainly composed of mining block rewards and transaction fees; at the POS (Proof of Stake) stage, the pledges are mainly awarded: Ethereum users only need to be in the main The net quality of 32 (ie 2^5) ETH can become a pledge and get rewards after completing the mission (recommended reading "The rise of PoS mechanism").

Recently, for the ETH 2.0 stage POS pledge, Ethereum founder Vitalik Buterin (V God) released his proposal on Github.

(V God proposal)

According to V God's proposal, if 1 million ETHs are pledged, up to 180,000 ETHs can be issued each year, and the maximum annual return rate of pledge is 18.1%.

In addition, the proposal also sets the upper limit of ETH pledge to 134 million (ie 2^27), with a maximum of 2.09 million ETHs per year, with a return rate of 1.56%.

It is worth mentioning that V God's proposal overturned the previous proposal on POS pledge in Ethereum and significantly increased the inflation rate and pledge ceiling (previously pledge of 100 million ETH). The reason why V God explained the increase in the upper limit is that 2^27 is the best upper limit currently recognized by the community.

(Ethernet's previous proposal)

Inflation rate is the core

Why did V God change the previous proposal? The biggest reason may be to control the inflation rate of ETH.

The total amount of Ethereum has not been set yet, and many tokens have been added every year. In order to maintain the stability of the currency, the inflation rate must be dynamically set. According to the Ethereum Foundation's 2014 plan, the first year of Ethereum's inflation rate was 22.4%; in the 64th year, the inflation rate fell to 1.0%.

The left axis is the ETH circulation (dark green curve); the right axis is the inflation rate (light green curve); the year on the horizontal axis

We put the two proposals into a table and we can find out the clues. In the old proposal, Ethereum's inflation rate was controlled below 1%, which is an absolutely idealized state; the new proposal inflation rate remains below 2% (up to 1.98%).

(Comparative table, Odaily Planet Daily)

(Odaily Planet Daily Note: When calculating the inflation rate, the total amount of ETH takes the current value of 105,776,856. In fact, the total amount will increase in the future, which means that the final inflation rate is lower than our calculation, but the decline is limited.)

"The old proposal hopes that the inflation rate will be within 1%. That is to say, in addition to some of the lost coins, Ethereum basically has no inflation." Ethereum researcher Hu Jingyu told the Odaily Planet Daily that the Ethereum inflation rate and Compared with the economic development of the real society, the 2% inflation rate is the healthiest. "The inflation rate is very low, that is, the fixed amount is basically maintained every year. The price of Ethereum can be relatively strong."

Since ETH is still in the issuance status, V God proposes to set the specific number of pledges instead of the pledge ratio. Is the inflation rate setting reasonable?

Grace Yu, head of ecology research at Cobo PoS, said, “V God only simulates how many additional pledges and annualized returns are generated, and takes a reasonable number. This number is not particularly important for the number of pledges or staking (deposit pledge). Because the decisive factor of this number is the rationality of the amount of increase and return."

Grace Yu added that the setting of inflation rate is an economic issue and is related to the economic system. “Usually in an economic system, inflation below 6% is helpful for economic growth and recovery. But inflation above 10% proves to have a negative effect on the economic system.”

Increase pledge reward

In addition to the inflation rate, the new proposal also involves an increase in pledge rewards.

According to Ethhub founder Eric Conner, the current ETH 2.0 verifier runs a beacon node with an annual operating cost of $120 and an additional $60 for each additional validator. Conner said that even in a bear market, verifiers still have the incentive to run beacon nodes.

Only the highest annual interest rate of 8.02% compared to the old proposal, the new proposal can reach up to 18.1%, which will undoubtedly encourage users to pledge, thus ensuring the normal circulation and security of the network.

“The highest reward is 18.1%, and there will be more and more ecological participants.” Qiu Xiaodong, Xinghuo Mine Pool, said that interest rates will be an important factor in their consideration of pledge, but they will also consider the security after POS is online. Decentralization and other issues. "As a commercial company, we must hope that the more coins we pledge on our side, the better, but the ecological collateral tokens and circulation tokens are still controlled at a reasonable ratio."

So, how much ETH is pledge is a healthy ecology? As mentioned earlier, V God and community members believe that the upper limit of pledge is 2^27. Justin Drake, a researcher at the Ethereum Foundation, said that the pledge of 2^25 ETHs (about 32 million ETHs) is the most conducive to system security. He also agrees with the proposal of V God.

“In the case of (plied 30 million ETH), the inflation rate is about 1% and the pledge yield is about 3.3%. (System) feels very healthy.”

Like Justin Drake, Grace Yu is also positive about V God's proposal. “This is reasonable. In a stable economy, the 3200W ETH pledged (plus handling fee) annualized rate of 3% is a steady increase.”

However, Eric Conner is not optimistic about this, he expects ETH pledge up to 10 million. According to the Odaily Planet Daily, the ETH inflation rate will be 0.54%, which is much lower than the current inflation rate of 7.5%, a drop of more than 90%.

Currently, V God's proposal has been added to the 2.0 specification by Ethereum 2.0 developer Danny Ryan. However, the community members also have different opinions on the specific details of the proposal. V God also said that it can be modified after the upper limit is determined (2^27).

Original article, author: Qin Xiaofeng.

Source: Planet Daily