Ethereum Update: Developers Compromise to Appease Miners, New Proposal Increases Issuance to 3ETH, Community Overwhelmingly Opposes

The Ethereum Improvement Proposal EIP 1559 proposed by Ethereum developers has sparked strong opposition from miners, with some even threatening to gather 51% of the hash power for 51 hours on the opposing mining pool Ethermine on April 1st. In response, developers have also proposed EIP-3368 as a concession, which has also faced significant backlash from the community.

EIP-1559 Proposal

Previously reported, the EIP-1559 proposal was first introduced by Ethereum founder Vitalik in 2018. It could significantly change the way transaction fees are calculated, and have a major impact on the value capture of ETH, user experience, security, and potentially lead Ethereum towards deflation by introducing a burn mechanism.

However, the proposal could severely impact miner revenues, leading to most Ethereum mining pools opposing it. Despite this, developers are still determined to implement EIP-1559 during the London hard fork in July, which has angered the opposing miners and prompted threats of amassing 51% of the network's hashing power for up to 51 hours.

EIP-3368 Resolving the Chaos

Core developer Tim Beiko, who previously included the 1559 proposal in the London hard fork, released the EIP-3368 proposal on the 13th, summarizing it as:

EIP-3368 will increase block rewards from 2 ETH to 3 ETH and gradually decrease them to 1 ETH over the next two years, lowering by 0.25 ETH per quarter.

Coming out of my twitter break to share this: miners' "counter proposal" to 1559 is EIP-3368, which would raise the block reward to 3 ETH and lower it to 1 ETH over ~2 years. @BitsBeTrippin should present it at the next AllCoreDevs. @EthMagicians thread: https://t.co/CLxc30AUPf

— Tim Beiko | timbeiko.eth 🐼 (@TimBeiko) March 12, 2021

At first glance, EIP-3368 alleviates the abrupt decline in miner earnings, removes the urgency to sell mining rigs, and reduces the willingness of miners who previously threatened to launch a 51% attack.

Miners Urged to Withdraw from "Show of Force" Activities

Following the release of EIP-3368, although not yet finalized, Red Pand, who previously rallied miners for a "show of force," urged:

I've heard about EIP-3368's approach, and I will withdraw from the "show of force" activity, and everyone should withdraw unless you are originally with the Ethermine mining pool.

We have been heard. EIP-3368 has been proposed. Reward to 3 ETH but drops 0.25 every quarter till 1 ETH over 2 years. I am going to rescind from the show of force to @etherchain_org April 1st and so should all of you (unless you were already on ethermine)

— Red Panda Mining (@RedPandaMining) March 13, 2021

Ethereum Community Strongly Opposes

The majority of the Ethereum community opposes the proposal for reasons including:

• It would disrupt Ethereum's "Minimum Viable Issuance" monetary policy
• No need to increase block rewards to maintain network security
• The rapid merge to PoS and continued mining for two more years is not practical

Deribit researcher Hasu also stated:

The proposal lacks convincing reasons, including why reducing block rewards by 20 – 30% would pose a risk to Ethereum. Bitcoin halves every four years, while Ethereum has previously reduced rewards by 60% and 33%. Everyone likes lower inflation, high inflation will eventually harm Ethereum, putting miners and holders in a worse situation.

Regardless of support or opposition, core developer Tim Beiko emphasizes that the developer forum EthMagicians is the most effective way to discuss proposals, far superior to engaging in Twitter bickering and criticism.