This past Monday, April 2, news broke that Vitalik Buterin, a programmer who is, more significantly, a co-founder of Ethereum, the second most popular cryptocurrency by market cap had been hinting at hard capping at 120 million the amount of Ether that could be created. Ether is the blockchain platform for Ethereum.
The pronouncement caused a stir among investors and market aficionados but was later revealed to be somewhere between a joke and a conversation starter. Here's Buterin's follow-up:
Many have responded positively to Buterin's April Fools meta-joke and shared their thoughts on why the implementation of a currency cap on Ethereum will most likely push the price higher.
There is a strong belief that adopting a maximum supply of Ether would make Ethereum more attractive. The cryptocurrency is trading at $394.99 at time of writing, with a market cap of $39.17B
Ether was first proposed in 2013 by Buterin and officially launched in 2015. Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications that run smart contracts.
On April 2, after Buterin tweeted that his proposal was intended as joke, he later tweeted that if the crypto community wants a fixed supply and people believe that his proposal, EIP 960, is a good way to achieve that, then it should adopt the proposal. If the community does not, then it should not. This is true regardless of whether or not the original intent was meant in jest.
Ethereum’s recent performance is no joking matter
Ethereum’s price, along with other major cryptocurrencies, has been sinking. Yesterday it was reported here that in the month of March, Ethereum was down 53.8%
On March 1, the price of one Ethereum coin was $869.24 by March 30 that same coin had slipped in value to $364.66, its weakest level since November 22, 2017. Ethereum ended the month at $392.97, not that far away from where it's currently trading.
For the year, Ethereum is down around 51%. On January 1, 2018 it was trading at $737.77 and rose to an all-time peak of $1,423.20 on January 13.
It could be that Buterin has something else in mind in terms of technological changes, Evgeny Ponomarev the co-founder and CEO of Fluence speculates, and that might be the whole point.
Ponomarev stresses that the problems with Bitcoin and Ethereum scalability are real and well known. Coupled with other necessary tweaks, the cap might help to ease the load on the Ethereum blockchain and make it more ‘crypto kittie' proof.
He's referring to the recent disruption to Ethereum from a digital gaming craze called Crypto-Kitties which created outsized traffic that caused congestion for users of the Ethereum network. According to ETH Gas Station, Crypto-Kitties accounts for 11 percent of all transactons on the Ethereum network.
Ponomarev adds that if the decision to limit Ethereum should go forward, it would provide more of a "psychological factor" since it could split the ether offering into smaller bits and the cap won't introduce any real scarcity.
Pramod Chandersekhar CEO of Peppermint-Chain Inc agrees that a hard cap on ETH supply would be good news. He notes:
“While a cap will most likely push the price higher in the short term because it is essentially limiting supply, to me the more exciting implication is that the Casper update (Proof-Of-Stake) is getting closer. Casper and Proof-of-Stake will allow Ethereum to get past the performance issue and see more mainstream adoption!”
Eagle An, co-founder and president of Bankorus concurs that a hard cap on Ethereum would provide a positive influence:
“By limiting the coin creation it will create clarity about its supply, which was one of the previous concerns for crypto investors. In addition the scarcity of the coin will form a bottom line or safety margin for the token value in the long run. With these changes the confidence level for investors will increase and confidence is the soft yet intrinsic factor that supports token value in the long run.”
Switzerland-based web enterepreneur and Fintech investor Marc Bernegger, who is also a board member of Falcon Bank, CryptoFinance AG, and an advisor to SwissRealCoin agrees as well. He too stresses that a hard cap would be a good idea:
“A hard cap could prove to be truly interesting for the future of Ether. Where the Ethereum protocol currently limits the new supply of the currency on a yearly basis and caps it by year, having a hard cap on the total supply of Ether would help increase the price of Ether, which has been declining over the past months. Even though [Buterin's) article was satirical, there is always some truth to a joke. I would say that it could make Ether much more stable”.
So Vitalik Buterin, if you’re reading this post, how about making this April Fool’s joke come true.