EIP-3368 - Block Reward Increase /w Decay for next two years

:thinking: more on this EIP, I think that it should actually be split up into two separate EIPs. One EIP to increase the block reward to 3 and have it decay back to 2 over some period of time, and a separate EIP to have the reward decay from 2 down to 1 over a separate period of time.

These changes serve different purposes and thus don’t need to be bundled with each other. Increasing the reward and then decaying it over time addresses the issue of sudden miner reward drops, and decreasing it from 2 to 1 addresses the issue of “we are overpaying for security”.

If the goal of the EIP is only to have a net-neutral issuance reduction then the EIP should ramp back up over time to the current reward of 2 (would need to do a bit of math to figure out the correct curve to achieve net neutral with a decrease followed by an increase).

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The claims of not engaging or listening the miners were directly refuted here:

“ Strongly disagree that they weren’t heard + respected. Several devs/researchers spent weeks answering their questions, refuting some of their objections, and literally helping them put an EIP together.”

“ The problem, I think, is not as much “not feeling heard” as “people don’t think their claims are as sound as they do”. Almost every core dev is aware that the hashrate will likely drop significantly post-1559, but they don’t see it as as big of an issue as miners do.”

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The 51% attack with rental hash works only for coins with low hashrate and that amount of hashrate being already available on rent.

For the biggest GPU boy Eth, it’s both operationally and logistically almost impossible to do a 51%.

For many parts of the last bear run, you could theoretically 51% Eth with $100k per hour. But it never happened. The reason is not money.

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All of the ETH holders are expecting deflationary effect from EIP-1559. It will fail every ETH holders if this EIP-3368 cancel the deflationary effect. In fact, 1 ETH added per block every 15 seconds will increase the inflatoin by more than 50% and will tank the ETH price severely. This controversial EIP-3368 should have be voted by all the ETH holders. This increase in inflation is paying to specific group on the expense of all ETH holders

The fact is the core devs have manipulated the price at the cost of miners. Time and Time again. Eip-1559 does not lower fees but again artificially inflate the price at the cost of the miner. Go read the yellow paper for YOUR first time. Only 77% of the supply that would have been issued until today has been. The core devs have repeatedly ignore the yellow paper. A small number of wallets hold 68 percent of all eth. Including the 90 million hidden premine.

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As a little/hobby miner, this EIP is light, not for the current profit of the coin, but for the amount of reward that I can save.

With this EIP, I would have the 32 ETH necessary to be a validator for when eth1 is “turned off”. I think I can say for many miners, that the change to dollars does not matter to us, we care about the amount of currency to be able to become validators. I think this should be taken into account since obviously the more miners we reach this amount, the safer the network will be.

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The proposal is a complete non-starter. Neither the author nor his supporters have provided convincing reasons why a 20-30% reward reduction to miners should put Ethereum at risk. Bitcoin’s block reward effectively halves every four years. Ethereum itself has reduced the block reward twice before, by 60% and 33% respectively.

The inflation reduction is clearly beloved by both current and prospective investors. E.g. this article on Bloomberg was the most-read on the entire site, clicked over 300k times on the first day. Increasing the inflation rate would destroy ETH’s blossoming SoV narrative and ultimately leave everyone, including miners, worse off.

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I agree @MicahZoltu, these EIP’s should be broken up - they serve different purposes, and one is contingent upon 2.0 while the other is designed to smooth out potential unintended negative consequences of EIP1559. There may be reason to extend or truncate the move from 2 to 1 that shouldn’t affect the move from 3 to 2. And it gives devs more control in the event of 2.0 delay or separately in the event of unforeseen developments in the mining space directly after EIP1559.

I am seeing a lot of posts here talking about how this will definitely bring up more net ETH to miners, but that may not be the case. I actually am okay with it being a net loss emission rate to miners over a 2 year period, but should be tied to milestone achievements by 2.0 devs. Smoothing out this emission schedule makes sense.

One more thing I didn’t note in my earlier long post: I fully expect the bull market to be raging in July, but I also recognize that this bull market is largely taking signals from BTC, which generally moves in 4 year cycles. If the party stops this July or so which isn’t an unreasonable position, you could have a severely cut mining revenue measured in ETH terms IN ADDITION to negative price shock (outside of ETH’s control) which is another combination of events that can lead to a risky environment that could lead to a 51% attack.

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Incorrect. Adjusting issuance up does not guarantee the fee burn, which is a product of usage, will result in reduced inflation. In bear markets, the exact opposite effect will be felt. That is not a strong monetary policy and means in bear markets Ether, and by effect of price impact on hashrate and network security, Ethereum, will be less resilient and suppressed by its own issuance.

You cannot guarantee a non-inflationary/decreasing inflationary state by increasing the issuance and relying on fee burns to cover. It simply doesn’t work in bear markets where usage is greatly reduced.

Protecting miners in bear markets is not under social contract, minimally viable issuance is and until someone can demonstrate reducing miner fee earnings via fee burn (which may be entirely offset by tips, additive usage from a more palatable and predictable fee market, and maybe even NGU around given several economically sound improvements inherent to 1559) at any price level is actually unsafe for Ethereum, which has blended hashrate between general purpose and special purpose which aids in protecting against such threats of rented or colluding hash attacks from either contingency, this EIP provides no actionable improvement to Ethereum and does not meet the burden of EIP-1.

You seem half correct. Issuance does not guarantee the fee burn, correct. But “Ethereum being less resilient and suppressed by its own issuance” makes no sense unless you’re strictly looking at price action, which past issuance reductions have shown, do not impact ETH price. To be honest, Bitcoin’s market cycle has more impact. In a bear market, especially with EIP1559, issuance is the security budget. How would an increase in the security budget make ETH less resilient? Resiliency does not mean positive price action. Resiliency means security. Furthermore, likely the bear market, if BTC’s history is an indicator, would begin in late fall, early winter, where the BR would likely be somewhere between 2 and 3. This is a small concession to make to ensure ETH has enough emissions to stay “best in class” and/or entire GPU miners on long enough to ensure ASIC consolidation isn’t a danger in a collapsing market. Especially if that BR between 2 and 3 in fall/winter is offset by a BR between 1 and 2 a year later. It’s the same net issuance.

We are not trying to be “protected.” We are trying to explain what consequences pulling certain levers have in a multi-chain world run strictly by incentives.

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It’s clear current and prospective investors like the idea of a deflationary eth. Basic economics of supply and demand, along with watching Bitcoins emission schedule, halvings have resulted in exponential growth. We could have one heck of a good debate if that is a current short term good thing for Eth or not, ahead of any proper scaling. A 3-5k Eth price is great for everyone that hodl eth and mines it for sure, but is down right asinine for users or prospective users UNTIL the L2/Sharding can help solve the fees. Usage decreases, scrutiny hits all time high that it’s effectively became too expensive to do anything unless your spending big money on transactions. This is a completely different argument, not for this EIP, but addressing the statement that the inflation rate would ‘destroy’ ETH’s blossoming “SoV” narrative (it has NO upper bound, wth are you even talking about)

With regards to EIP and why the suggestion of a potential increase and decay. The basic analysis that has been completed show’s 10 different scenerios, specific to three key inputs.

  1. Total potential hashrate - This is established by looking at known/known existing Eth Hashpower on network now, roughly 410 TH of output. + sum total of other GPU enabled Networks, calculating additional potential of Hashpower, which last calculation was roughly additional 110 TH of potential. The current growth curve, due to Eth’s price/yield still is higher than most folks break even, thus more hashrate continues to increase near the point of equilibrium on the average ops cost to mine/operate.

  2. Ethereum Price

  3. Yield produced /v MH - (Currently Block Reward + Fee/‘MEV’ + Orphan Inclusion)

My concern I raised at the ECH, that was refuted with ‘MEV, MEV, MEV’ declarations that when/if properly configured at the mining pool, they could extract a majority of the (fee) thus resulting in a much less potential ‘loss’ with the Basefee Burn. That very well maybe the case, not refuting that, I think the data you have provided along with reading into the flashbots discord has provided ample evidence this claim maybe in fact true. It’s on the mining pools now to configure and ensure their miner clients are able to participate in the yield.

The great risk though rest in the shear size the network has grown (Natural effect of PoW + traditional incentive model, working as intended) and will continue to grow ahead of the July London Hardfork. What is being missed is the fact much of this growth comes in the form of new participants, continued social media fervor (Linus Tech Tips yesterday, 13.1m sub channel showed his audience how to use NiceHash Quick Launcher, which focuses on Eth Mining Only) which puts additional pressure factors of risk, bringing up the 'nice hashable attack amount" mixed with potential immediate yield hit on Eth, which we both agree could be LOW if conditions are right (high price, medium sized MEV); risk is next to nil in that regard. My concern stims specifically around a overall change in the environment where we could have rapid price decrease for whatever reason, atop the yield decrease, atop other chains being able to take from Eth’s PoW dominance. The world is bigger than just Ethereum in the PoW space and other coins have gained some ground on taking hashrate away from Ethereum. This coupled with those other rapid decrease potential, no matter how small a percentage does not get around to the fact the Ethash Algorithm is not 51% protected and that Algo has been attacked on multiple other networks successfully.

The entire point is centered around protecting Eth’s network full stop. If a tapered emission schedule is ‘not worth it to’ the community, as ironically greedy as that sounds, then Eth should seriously consider a 51% attack solution other than the incentive to mine that wins by shear force. Implement what ETC had to do with MESS, Gravity Well or some other form of 51% attack protection against Ethash. That serves no emission and protects against the threat we are concerned against.

Lastly I am updating the models that again show a range of theoretical attacks given specific scenarios, but I will reiterate there is nothing theoretical about the ethash currency being susceptible to a 51% attack, because it has, multiple times. I am arguing the climate, scale and incentive has changed and eth is no longer as protected as it once was. I hope I am greatly wrong and have no problem accepting the fact if nothing happens when nothing is done about it, I was lucky incorrect as we all have a lot to lose if nothing is done and I end up being unfortunately, for whatever left field (series of events that lead to 51%) turns out to be correct.

Protect the network at all cost, through PoS transition. Max Security, not “max my pocket book at the risk of the network”

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addressing the statement that the inflation rate would ‘destroy’ ETH’s blossoming “SoV” narrative (it has NO upper bound, wth are you even talking about

This idea that having no upper bound destroys SoV narrative is deeply flawed. An upper bound sounds nice on paper, but in the long term leads to a chain unable to pay for its security as well as instability issues due to fee-dominated rewards. This latter point being one of the arguments for the fee burn in 1559.

A 3-5k Eth price is great for everyone that hodl eth and mines it for sure, but is down right asinine for users or prospective users UNTIL the L2/Sharding can help solve the fees.

This is backwards. Fees are not determined by price. Fees are a result of limited block space interacting with demand for block inclusion. Fees can be correlated with price, but I don’t see the logic in fearing a price increase itself.

It’s on the mining pools now to configure and ensure their miner clients are able to participate in the yield.

Worth highlighting that MEV is not just from the use of things like flashbots. MEV is earned by miners today even in pools doing nothing at all due to on-chain gas auctions. The fees from these auctions will continue to be earned by miners post-1559 via the inclusion fee.

The world is bigger than just Ethereum in the PoW space and other coins have gained some ground on taking hashrate away from Ethereum.

Do you have the latest data on this? I recall someone taking a look recently on the #1559-mining channel and came up with ~95% of GPU PoW rewards being from Ethereum. I will run the numbers myself later if no one has it.

Protect the network at all cost, through PoS transition. Max Security, not “max my pocket book at the risk of the network”

I don’t understand how you can at the same time accuse others of putting their pocketbook first and then argue for “Max Security”? Why not increase the BR to 4? Or 10? Those increases would provide even greater security than 3.

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Think the primary point on this one was L2/Sharding should answer the call on the fee-dominate network as the fees drop significantly and returning the incentive only to the issuance emission. The network contracts accordingly as adoption (which takes time) moving to L2 solutions. What is completely lost it seems here is the burden of loss (burn) isn’t really on the Miner as much as it is on the user. User’s are paying for the inclusion at high fees, not miners, miners are incentivized to order sort highest transaction value first and include with block reward. But the narrative is switched to 'by burning we can drive value to eth’s bottom line" This doesnt promote using ethereum, this promotes hodl ethereum and resting on the backs of people that use ethereum to burn a portion of their contribution for the betterment of everyone else. This seems like a pivot of ideology from ‘using ethereum’ to, if you use ethereum, a portion of that supply will be burned, lets pump that price up!

When paying for fee inclusion it’s predicated on a price from a user perspective. When we use metamask, it offers a spot price with a respective yield. If ETH is 5,000.00 per eth, the cost of gwei goes up. The average transaction value back in August when everything was on fire was 240gwei, it costed me 12.xx to interact with a smart contract at 338.xx eth price. Now at 1800 eth price, that same contract interaction cost me 400+ at 540 gwei pricing. What am I missing here if eth price 5k and nothing is done for scaling? Less people will use Eth, which IMO sucks, unless eth is going to go on a crusade and drive the SoV narrative not usability.

I am adding this to my analysis coming into friday to show full size of pie potential. It is a vital number to understand with any non-protected 51% algorithm and the potential hashpower that could affect it. Targeting by Thursday.

The 3 was calculated from the average total BR+Trans+Inc fee as the average block reward payout (Yield) since last May to current. The average since November has been more around 3.7-4 eth, 2 of which is the emission, the other 1.x to 2 being the fees. An offset was suggested to ensure the yield decrease was not so drastic to cause a significant pullback in hashpower, opening up risk to the network. This number could be adjusted to 2.5 vs 3, halving amount and as long as MEV does in fact make up the difference, it becomes a mute point. If the cut + a price decrease which drops total participation that’s the risk.

Again, as this discussion gets further along I see the narrative of a min. security amount will drive eth’s decision, thus an alternative to 51% risk (MESS / Gravity Well) should be considered if this is not pushed through.

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I want to thank everyone for their perspectives, and add my own in as a new miner and as a result new Ethereum user. I was really surprised when earlier this year that GPU mining at home was still profitable. This was the motivation I needed to finally jump into crypto. Otherwise, I would probably be looking at the sky-high prices of BTC and ETH and think “I’ve already missed that rocket ship.” Now I’m starting to get interested in things like Defi and staking Eth 2.0, and as I complete my CS degree I’m interested in developing on blockchains. I’ve also turned two of my co-workers as well as my cousin onto GPU mining with their gaming rigs, and one of them has also decided to invest more into understanding crypto and mining. EIP 1559 and the resistance to the compromise EIP 3368 are confusing to me. What is the motivation behind burning the fees as part of 1559? Does the Ethereum community want to discourage new miners from joining just so that they can boost the value of their own ETH through deflationary pressure? Please explain to me if the rationale is something other than just to maintain an exclusive clique.

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Now at 1800 eth price, that same contract interaction cost me 400+ at 540 gwei pricing. What am I missing here if eth price 5k and nothing is done for scaling?

An eth 2 dev took the time to write out common misconceptions in the discord with parallel development being a key point. I know you are in that discord. Harping on “nothing being done for scaling” is not helping your argument.

How does eth price and gas price increase beyond usability if no one can afford to use it? The reason ETH price is rising and gas prices are high is because people want to hold and transact ETH. If the price continues to go up, this only means people value transacting. Scalability is desirable and is being worked on, but saying that price escalation is undesirable makes no sense. It is a consequence, not a goal.

lets pump that price up!

unless eth is going to go on a crusade and drive the SoV narrative not usability.

Again, this is not driving your argument. A deflationary environment is a possible consequence of 1559, not the goal. Equate this to increased security for the network being the goal of 3368, not the consequence that miner’s compensation goes up.

What is completely lost it seems here is the burden of loss (burn) isn’t really on the Miner as much as it is on the user.

1559 and the associated fee burn does not meaningfully affect fees paid by users. This is especially true because of the next point.

The average transaction value back in August when everything was on fire was 240gwei, it costed me 12.xx to interact with a smart contract at 338.xx eth price. Now at 1800 eth price, that same contract interaction cost me 400+ at 540 gwei pricing.

The key thing you are missing is that the increased fees you are paying now are not driven by the price increase in itself, but by the increased demand for block inclusion. These can of course be correlated to some extent in that higher price can attract attention to Ethereum. Importantly, in a world where virtually no goods and services are denominated in ETH, people think about fees in fiat terms (like you just did). This means that given increased price of ETH and constant demand for block inclusion, you would just see fee amounts in ETH lowered and in fiat terms the same.

The last few months lends evidence to this point: increased price has come with increased demand for usage of Ethereum. Of course lower fees are desirable through better scaling, but the idea that price should be a factor when thinking about scaling is not logical.


Personally I think arguing about the merits of the EIP is unproductive until we have more data than the speculation thus far. Considering we are mere days until the ACD call, my intuition is I don’t see how building consensus around such a big change could be done in that time even if the data were available today, let alone Thursday. It’s always possible the data paints a convincing picture the change is needed, but as of now I am unconvinced.

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You’re correct, there is parallel efforts going on in scaling. Not fair to throw that completely out, more of a general statement of proceeding with PoS ahead of scaling ready for prime time is interesting. As a participant that is not tracking the progress on discord or reading our ramblings, just wonder if that transfer of conflagration is going to be worth it to the foundation/acd and dApp makers when less burdened transactions are not a thing upon the merge. Some calculus going on there on patience.

Again another fair counter. Having to write this EIP by design I will be implicated that we are trying to pad our pockets vs network security. ‘Hopefully’ none of it will be needed, but that’s the risk it sounds like folks are willing to take.

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There is an ACD meeting Friday and the miners are trying to increase block rewards from 2 to 3 in the same fork as 1559. The Devs are asking us to take a community poll to see if we have consensus. We need everyone to please take the poll, this is very important. https://www.reddit.com/r/ethereum/comments/m5vvyb/eip3368_increase_block_rewards_to_3_eth_with_2/

I don’t believe devs are asking for such a poll at all. What’s needed is a compelling data backed argument for why such an increase is necessary. This is not just a popularity vote.

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