On January 16th, Ethereum will carry out its eighth major system upgrade – Constantinople. While the upgrade is expected to significantly improve the performance of Ethereum, the reward for miners will face a 33% decrease, moving from 3 ETH to 2 ETH per block.

One of the biggest names in the Ethereum ecosystem, ConsenSys wrote a blog post explaining the implications.

Response To Worried Miners

The core developers decided to adopt this upgrade in August 2018, but there is substantial opposition from miners. Those mines equipped with tens of thousands of machines are not the ones worrying, but the upgrade has caused a lot of concern for smaller-scale miners. The Constantinople upgrade was originally scheduled for October 2018, but problems in testing forced a delay in final release. One of the biggest problems was that there were too few miners to run the beta client.

Regarding this problem, the blog post wrote:

“A natural reaction to the news of reduced rewards for miners might be: “If miners receive fewer ETH for their efforts and energy output, won’t they leave the network?” The question is not unfounded; in general, miners are relatively blockchain-apathetic. They will devote their energy towards the highest-ROI chains, where the profit between the cost of energy spent and reward in crypto is greatest.”

They go on to say that key factors that will respond to the reduction in block prices are the price of electricity and hashrate. After describing how each factor will influence, they conclude:

“The conclusion is that the primary force behind miner behavior on the Ethereum network is not the number of ETH rewarded per block, but rather the price of electricity and the price of ETH. The decrease in hashrate and difficulty are consequences of when those two factors do not create a profitable environment. The thirdening of Ether’s block rewards will lead to a decrease in inflation. Should the reduction in ETH inflation have a positive impact on the market, miner behavior holds that miners will return to the network.”

Conclusion

To control the inflation of the chain, the block rewards need to be reduced. Doing so in the ETH blockchain reduces the new ETH in circulation. The blog post reads:

“After the Constantinople hard fork; total new ETH supply will reduce from 20,300 ETH/day to 13,400 ETH/day and from 7.4m ETH/year to 4.9m ETH/year.”

The views and opinions expressed in the article ConsenSys Explains the New Ethereum Block Rewards Reducing From 3 ETH to 2 ETH do not reflect that of 48coins.com nor of its originally published source. Article does not constitute financial advice. Proceed with caution and always do your own research.

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