Ethereum (ETH) Holders Vote to Reduce Fees as Miners Earn Over 8% of Market Cap Annually
A recent report revealed that Ethereum's (ETH) network fees as a percentage of its market cap were more than twice that of Bitcoin (BTC).
The incentive attached to cryptocurrency mining has seen lots of individuals venture into the sector, and a recent report shows just how lucrative the process is for miners on the Ethereum (ETH) network.
Miners on the Ethereum network make big money
Although individuals fear there is no return from the devaluation of the crypto market, the Ethereum protocol continues to offer massive revenues for network miners, with estimated figures reaching up to $2.5 billion-a-year in payouts (prorated using daily average).
The recent report by TrustNodes shows that mining revenue accounts for about 8.3% of Ethereum’s market capitalization – which is estimated at $31 billion at press time.
The report reveals that over a period of 24 hours’ miners on the Ethereum received over $6.6 million in incentives. This value includes all block base rewards, mining fees, and “uncles” rewards.
If the statistics are taken as a daily average and spread over 365 days, the numbers will add up to over $2.36 billion in mining incentives.
The figures could possibly be higher or lower if the value of the Ether rises or drops. TrustNodes also calculated Ethereum’s inflation rate to be 7.3%.
Ethereum holders have spoken
On August 11, 2018, Ethereum held a vote regarding the issue. Despite the low vote count, the results leaned heavily on a reduction in fees to 1 ETH per block and to delay the difficulty bomb.
Ethereum ETH vs. Bitcoin (BTC) Fees
These figures show that miners of Ether make up a larger percentage of its market cap than Bitcoin. Bitcoin’s inflation rate was also calculated to be 50% less than Ethereum’s.
On the same date TrustNodes collated these values, Bitcoin gave away a total of $12.7 million in mining incentives which would translate to about $4.6 billion in yearly payouts or 4% of its market capitalization.
TrustNodes considers Ethereum’s significant inflation rate and huge mining incentives to be as a result of the protocol’s decision to delay the mining “difficulty bomb”.
Casper’s update is expected to resolve Ethereum’s issuance
The current Ethereum network rewards miners with 3 ETH for reach block mined, with extra rewards in the form of block base rewards, mining fees, and “uncles” rewards.
The update to Ethereum’s Casper will ship with a mining program update: the “difficulty bomb” for the fight against the rising threat of ASIC miners by switching the system to a Proof-of-Stake protocol.
However, the much-awaited Casper update is unlikely to be deployed until mid-2019.
Ethereum developers have suggested that to keep the inflation of the token in check, reducing this issuance is paramount.
Ethereum developers have come up with four different proposals which would they propose would provide sufficient incentives and help the network reach its maximum supply.
The proposals include:
- Increasing the block rewards to 5 ETH;
- Keeping the block rewards at a stable 3 ETH;
- Reducing the block rewards to 2 ETH; and
- Reducing the block rewards to just 1 ETH.
Of these four proposals, reducing the block rewards to 1 ETH was most favored by the Ethereum community, with 65,000 ETH voting in favor of reducing block incentives to a low value.
If the block rewards are reduced to 1 ETH, inflation would drop down to 2.3%. 2,262 ETH favored reducing the block rewards to 2 ETH which implies an inflation rate of 4%.
As expected, miners have complained that low rewards may mean lesser earnings for them.
However, by reducing the max supply for Ether, an increase in fiat price can be expected for the low amount of ETH awarded.