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

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Hello everyone. I am a rather large Ethereum miner - currently mining at about 150 Gigahashes mining ETH. I have mined Ethereum since genesis block. I built a business around mining and have personally brought millions of dollars into the ETH blockchain itself through my hosting company. During the last 6 years in the industry, I have followed the GPU mining market very closely and have watched a number of projects lose their footing to 51% attacks. On the other hand, I also am a major ETH HODLer and I believe in the project long term. I participate in DeFi and am learning more about NFT’s. I have my feet in multiple “camps” of the Ethereum community, but my expertise lies in the mining ecosystem.

That all being said, major upheavals in the mining economy of Ethereum do not happen in a vacuum. Ethereum has enjoyed being the “best in class” for mining since its inception and has not had to worry about a lot of security problems that many other PoW chains are forced to address. And as a result, I believe that has contributed to a large degree of hubris over the last year or so. Reading ETH twitter confirms this hubris to me on a daily basis. This kind of hubris looks to be playing a large role in downplaying miners’ concern and misrepresenting their concerns as “greedy.”

As a result of talking past each other and seeing each camp as having nefarious intentions, communication seems to have broken down completely.I am reading many tweets about how miners are purposefully trying to stop Ethereum development. I have seen tweets arguing to reject 969 simply because miners attempted to show that a 51% attack is possible NOW, which means it is far more possible after revenue is cut in half. And this perhaps misguided move was attempted only after Bitsbetrippin has built models around the risks that appeared to have been ignored. I’ve seen tweets that miners tried to 51% attack the network. The only party who could have 51% attacked the network IF that threshold was reached was Ethermine and they weren’t even a party to the “collusion” effort. So this claim is nonsense, and it demonstrates to me that a lot of the influencers are overreacting to the miners looking to prove a point.

Miners have no intention of stopping development on the network, as some people claim. Miners know PoS was on the roadmap, and we have accepted reduction in block rewards multiple times (that were meant to increase price but didn’t). We understand fees are high and we want DeFi and NFT’s to grow. There was obviously miner opposition to EIP1559, but miners have coalesced behind BBT, who is not proposing we remove EIP1559 at all. What are we stopping exactly? In fact, there have been a few miner-backed proposals that did not get accepted. No one is saying devs are trying to stifle development on the network as a result of these EIP’s not getting accepted. I got in this space for its long term utility, and to support in a way I understood how, not to leach on to the work of others. I support layer 2 solutions, PoS, and once it was accepted by ACD, EIP1559.

Miners are seen as a carbon-creating evil that must be stopped at all costs. Every single miner I know mines green, including my business. Those that don’t usually wise up and send a green mining co their equipment. We get all carbon neutral power. And that is the norm because power is cheaper when it is renewable. Smart miners set up their shops in renewable, asymmetrical energy production sites where supply varies wildly, and we can capture the difference in supply and demand. You are seeing this daily with wind, and seasonally with solar and hydro.

Miners lately have been characterized as not ETH HODLers, which is untrue. I peruse various forums and groups all the time and miners are so excited about their mining rewards and plan to hold. I personally am holding as much ETH as I can. I have purchased 0. That is mind boggling to be able to participate in crypto finance by just providing a service to the network.

Furthermore, miners are characterized as bad because they have overhead v. stakers which do not. I advise to all of my clients to grow their ETH as much as possible, and pay their hosting fees to me from more outside investment. Almost all of my clients have not sold a single ETH. Furthermore, my business is able to HODL all our ETH by sustaining our existing and bringing on more clients. We have not sold a single ETH since June of last year. Mining businesses can never sell their ETH by intelligently designing their business models.

Now that I’ve addressed many of the ad hominem or general attacks against miners, I hope I can address the miner concerns as they relate to ETH which are as follows:

  1. The change in rewards is too stark, too quickly. Here the local utility raised the rates of crypto miners, but they did so over the course of four years in order to give crypto miners the chance to adjust their business models. While I wish the increase wasn’t as steep, the truth is the utility was able to retain much of the revenue from those businesses as they did not go under. One county over, their utility raised rates overnight 500% and it killed a number of jobs there in one day. The utility has since reached out asking why the miners are now offline. They thought they could simply absorb the cost differential, and now the utility gets 0 revenue from those businesses. The point is, in multi-billion dollar industry, change is designed to be incremental so we can see the effects of policy play out. EIP1559 as its written does not allow devs the time to react if there was a miscalculation.
  2. The risk for 51% attack is real, and Ethereum has a lot of enemies right now. The truth is there have been over a half a dozen 51% attacks and all of them were during that unstable transition between GPU miners and ASIC’s, or not best “in class” mining hashrate. VTC had Lyra ASIC’s, ZEN had Equihash ASIC’s, ETC was not best in class. Ethereum may find itself in BOTH situations where ASIC’s are proliferating on their network, centralizing hashrate, AND RVN can compete for GPU hash due to its high emission rate relative to Ethereum. RVN does not need as a high of a price because its emission schedule is so much higher. Profitability falling off a cliff during a bull market leaves a lot of hashes on Nicehash wondering where to go. It’s kind of a perfect storm.
  3. Raising the BR to 3 and tapering is still in line with minimum viable issuance policy (MVP). I have seen some disingenuous arguments made saying we cannot raise the BR as its an increase in issuance. This is not the case. Miners would still experience a net loss in effective revenue the day when EIP1559 launches. And through the burn mechanism, it woud be a net issuance decrease as well. And miners would likely accept (I would) a tapering schedule that would be a net loss in Ether over x period. The point we’re trying to make is that the shock in the mining economics causes a risk. We are not fighting for more Ether in the long run. The timetable to 2.0 is the main driver for that.
  4. Some stakeholders are just saying they’re going to rush 2.0. This is dangerous also, and anyone who argues it is not is taking an emotional stance. It is absolutely dangerous to rush a massive security consensus change on the 2nd largest blockchain in the world because of political reasons. ETH should be focused on scaling, not politics.

Anyway, I hope this is a level-headed post in a heated discussion around EIP1559 and Bitsbetrippin’s EIP 3368. I think its important to retain a sense of community. Miners have been getting beat up lately, and it’s actually kind of emotional to some of us to steer our entire career towards protecting a network silently in the background, only to have the entire segments of the community seem to switch gear and beat up on you. No matter what the outcome, I wish ETH success. I will be HODLing.

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Really good arguments, you almost make me changed my mind about this EIP.

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I am so happy that the discussion has moved to a forum instead of twitter. In any conversation, it is important that we assume positive intent, and having this discussion in long form makes it easierto assume positive intent than in twitter.

Miners have a very relevant and informed perspective, but because of the existence of a monetary incentive, they are being assumed to have negative intent. This is incredibly short sighted. I’m really happy BitsBeTrippin is beginning to be heard, and am confident that these VERY VALID CONCERNS will be heard by the risk adverse core devs in charge of these sorts of major upgrades.

Full Disclosure:

I have a very small mining operation (about .08 ETH a day, which PALES in comparison to my ETH holdings as a very early adopter), it was an educational experiment… I bought my rig from someone who was mining on NiceHash so i continued to use NiceHash, as selling my hash rate looked to be giving better returns than just mining directly from a pool.

I am confident my rig was used to 51% attack ETC, and this honestly really pissed me off and I still feel guilty about it and I do not use Nicehash any more (In some ways, ETC is my baby, but thats another story :wink: ).

I don’t think anyone can credibly attack my commitment to the success of Ethereum, nor my overall understanding blockchain networks (I have the first masters degree in digital currencies… ever)… This tiny bit of mining perspective, plus a focused study of Token Engineering for the last couple years helps me see how real and unnecessary this risk is. I am much more bias by my ETH holdings than my small mining rig set up, that is really more of a conversation piece in the Giveth home than any thing else.

Please, so many people have so much riding on the continued trust of the Ethereum network’s security, let’s assume positive intent and listen to our well informed mining friends about this valid concern, and address it before adding EIP1559 to the network.

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From my point of view as Developer is a “rush” to ETH 2.0 could lead to “rush” bugs and bugs sometimes are catastrophic! (even the smallest one).

Also since the code is “open” to Github anyone with skills can find a way to attack the network or do malicious actions if the network isn’t secure enough.

Developers and miners are one big family that they can sit on a table and find a solution!

That’s Ethereum!

Thank you

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The effect of implementing EIP-3368 is ballooning inflation rate by 50% just to pay for specific groups. The decision severely impact the price of Ethereum and it has to be agreed by the entire network.
I for one will NOT allow this EIP-3368.

We have seen multiple times in Bitcoin halving in real scenario as a result of dropping miners’ profitability and the hash rates never drop to expose to 51% attack. DO NOT implement EIP-3368 or face the risk of end users jumping to other chains. There are lots of ETH holders supplying LP and these people will no longer hold ETH from the risk of severe long-term price drops.

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where is your evidence that price drops correlates to miners dumping ETH?
Jan/18 -> Dez/2018 ETH went from 1300e->200e are you insinuating miners were responsible for this?
Does the word Hodle origins say anything to you?

Also EIP 3368 only activates under certain conditions did you at least read the proposal?

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This does not balloon the inflation rate as it is implemented alongside EIP1559. This will have a net reduction in inflation with the fee burn.

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I am just a miner
In my opinion it should be done fast and right now.
Its unfair to all those who are investing in mining equipment now
Shut down POW as fast as possible we will find another coin to mine
So what ever the decission is i am fine with it but in all fairness to those who are investing in mining equipment shut it down asap.

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First, I think it important to remember that everybody here is here for the same reason, we care about ETH. The last thing we need is toxicity and let bad “news” articles and tweets with false information drive the discussion. It is obvious that miners also care about the future of ETH as many of them are bag holders and DiFi users. Miners also has been working as ambassadors for ETH in the crypto space for years.

I discovered this thread after a tweet. I hold some ETH but is no whale of any sort. I work as an IT security consultant and has 20+ years in the field. This is why this EIP caught my eye.
Playing around with the security reward midair when POS is 2-3 yeas out seems completely unnecessary. Why risk it. Even if you think the risk is very small. It’s not zero. Let not take the risk with a 200+B network. The risk/reward do not make sense to me.

I think the functionality and trust in ETH drive the price more than a tiny fee burn ever will create. Trust will be reduced if the developers can change a big security settings midair and ignore concerns from folks like this BBT that as put down the work to show multiple scenarios where this fee burn can create danger to the network. To dismiss all folks that think fee burn is a security risk as greedy miners is too simplistic. The best solution is often a middle ground.

Pardon my English, it is not my first language.

/A.A

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: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

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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.

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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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