ethereum classic and crypto monetary policy london event
TRANSCRIPT
ETC Year One and Crypto Monetary Policy
Dr. Avtar Sehra@avtarsehra
London Event
13 December 2016
3rd Party Products and Services
“Do not go gentle into that good night..”- Dylan Thomas
Changing an Immutable Public Blockchain The DAO, a smart contract based fund raised ~$150million from more than 11,000 investors, and was hacked, with ~$70million** being “misappropriated”. The immutable Blockchain transactions were reversed to return funds to investors through a “hard fork” on July 20th 14.30 UTC
*Weakness in smart contracts was due to a reentrancy issue** Figures based on $20=1ETH market price at time of hack
●Immutable Infrastructure should be a truth machine that can not be changed no matter what the circumstances
●Neutral: Infrastructure should be neutral to transactions/ applications on it; endorsements by a central team leads to conflict of interest that skew future evolution
●Open: Infrastructure should be openly accessible by anyone to ensure scalability and minimize possibilities of risks linked to centralization
Principles of a Decentralised Infrastructure
All key aspects of the ecosystem require a certain level of decentralization
Decentralization of all aspects of ETC Ecosystem
Technology• Core Dev/Support• Operations• R&D
Community• Marketing • Education• Dapp Dev
Administration• Governance• Finance Management• Risk Control
Decentralized Infrastructure
Minimizing Points of Failure
● Core ETC dev team being established● Multiple clients ported● Execute removal of difficulty bomb● Strategy/fix for transaction replay
issue● Assess dev of ETC Mist-like client● Deploy independent blockchain
nodes● Grow core developer community
2016 2018
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● Collaborate with Ethereum developers to design, dev and test core protocol updates?
● Research/test PoW/PoS mechanisms● Research/test maximally efficient
monetary policy for consensus mechanism
● Dev ETC focused Mist-like client● Assess path to state Sharding ● Assess VM upgrades e.g. verified
compiler● Establishing communication channels
for global coordination and consistency
● Setup global meetups to begin deployment of decentralised community network
● Establish framework for Dapp developers
● Defining core social contract● Defining community-driven roadmap● Define governance models for
execution● Design/deploy funding mechanisms● Define monetary policy
● Execute PoW, PoS or Hybrid cons mech
● Execute appropriate monetary policy● Test/implement state sharding● Research/test VM improvements if
deemed fit for implementation
● Further outreach to miners● Extend meetups and conferences● Setup of overall Dev conference ● Deployment of structured Dapp dev
ecosystem and support framework e.g. hackathons and 3rd party funding
Ecosystem Roadmap
Focus Points to Ensure Sustainability
1. Define Monetary Policy
2. Expand Core Dev Team
3. Establish Funding/Governance
4. Establish Dapp Dev Community
Perception of Sustainability
ETC Price has Stabilized over last month as community has started to focus on monetary policy planning
Monetary Policy:Controlling the Supply of Money
Gold and silver mining in ancient Greece; where precious metal based monetary economy replaced barter trading in seventh century BC.
Store of Value
Functions of Money
Medium of Exchange
Unit of Account
Store of Value: Allows purchasing power to be saved, and used in the future
Unit of Account: Stable and easily divisible expression for the worth of any good or service
Medium of Exchange: Accepted by all as a means to transact goods and services
Example of Bitcoin Monetary Policy in Action
Started: Jan 3rd 2009, 18:15:05
0 coins at the start, and there is a cap of
21million coins
Through process of mining, validating and “recording” new transactions in the
blockchain, 50 coins were released every 10 minutes
to miners (along with transaction fees)
Reward of 50 coins is reduced by 50% every ~4
years. We are now on 12.5coins per mining
reward
By October 2140 the last Bitcoin will be mined, at
which point its is expected all rewards are replaced by
transaction fees
Store of Value
Factors to Manage Cryptocurrency Monetary Policy
Medium of Exchange
Unit of Account
Store of Value: The value of the native digital asset on the network could be managed by controlling perception of future value of the token through scarcity and supply control:
• How native digital tokens enter (and exit) the system
• Is there a capped or never ending supply (deflation/inflation)
Medium of Exchange: Number of retailers that are prepared to accept cryptocurrencies as payment is not within the direct control of the network, but it can be nurtured:
• Simple tools for interaction with network
• Perception of stable and secure means of transaction
Unit of Account: Parties agreeing and negotiating prices of goods and services in cryptocurrencies is challenging as it depends on the wider economic factors e.g. fiat system stability, legal and regulatory factors, but it again can be nurtured:
• Value of native token is stable over time
• Simple divisible and manageable units
Comparing BTC and ETC Monetary Policy
Currency Start+UTC
Starting Money Supply
Supply Cap
Average Block Time
Start Block
RewardSupply
ScheduleCurrent Block
Reward
Money Supply as of 5 Dec
2016
Monetary Base
Model
Bitcoin (BTC)
Jan 3rd 2009 18:15:05 0 BTC 21million
BTC 10 minutes 50 BTC
50% Reduction
every 210,000 blocks
(~4years)
12.5BTC 15,959,725 BTC Deflationary
Ethereum Classic (ETC) Jul 30th 2015
15:26:1360 million
ETCCurrently No
Cap 12 seconds
5ETC(4.375 ETC for max 2 Uncles
Perpetual Release
5ETC(4.375 ETC for max 2 Uncles
86,560,205 ETC Inflationary
3rd Party Products and Services
1. Technology Progress to Date and Next Steps by Igor Atramonov
2. Overview of Proposed ETC Monetary Policy by Matthew Mazur
3. Panel Discussion on Monetary Policy in Cryptocurrencies
4. Video Message by Carlos Graterol on ETC Twitter Sentiment
3rd Party Products and Services
Ethereum Classic
Technology Progress to Date and Next StepsDecember 2016Igor Artamonov
How it startedAt block 1,920,000 (at 20 July 2016) Ethereum Classic was born
In the early days people kept using the nodes without the hardfork
At the beginning there were only one person who was able to maintain the Ethereum Core code - Gravity
Then, a few more developers joined ETC GitHub To fork and fix Ethereum code
To start new projects
Ethereum Classic Progress1. ETC Community has focused on taking care of all core
aspects of the network: Nodes and Wallets
2. Successfully made first protocol upgrade (Hard Fork at block 2,500,000)
a. VM Operations reprice to mitigate DDoS attack
3. Implementation ready for the next fork planned for 15th of January
a. Difficulty Bomb delay
b. VM Operations price improvements
c. Replay Protection
Core Projects
Geth - official client implementation of the protocol
Parity - 3rd party client implementation, supports both ETC & ETH
Mist - official wallet for ETC
Additional Projects
ETC Block Explorer (hosted on etherhub.io)
Dapp UI SDK - Javascript components for building ETC applications
EtherJar - Java tools for Dapp developers
EtherKube - tools to deploy/manage ETC nodes in a cloud (Kubernetes & Docker based clouds)
CommunityThe Community is the main force
behind ETC decisions and development
All significant changes to the protocol are made through ECIP (Ethereum Classic Improvement Proposal) process
35 members at the moment who have rights to commit
Community makes code reviews for each commit into core projects
Other people can send Pull Requests
Core Projects Team
Dedicated team to work full time on Core Projects
To maintain, improve and implement next versions of core projects
Forming currently by Igor ArtamonovHiring Rust, Go and Javascript developers
Team funded by investors who are interested in Ethereum Classic’s future
ETC is also looking for additional and sustainable sources of funding
Core Projects Plan for Y17Do protocol upgrade on January 15th
Difficulty Bomb, Replay Protection, VM Operations Reprice
Implement and test new Monetary Policy
Classic Wallet (New Project)We aren’t happy with current Mist (ETH Wallet) code and we don’t think it’s worth the
effort to maintain existing code, so focus is to create a new wallet from the ground up
Research Hybrid Proof-of-Stake/Proof-of-Work consensus applicability to Ethereum Classic
Maintain Geth and Parity
Overview
Other Teams
Few other teams and commercial organizations are gathering around Ethereum Classic at the moment
Ethereum Classichttps://ethereumclassic.github.io/
2016
Igor [email protected] /
[email protected] @splix
3rd Party Products and Services
ECIP-1017Matt Mazur
(snaproll)
Current Network Hash Rate ≈ 700 GH/s
• Large scale, high risk, high profile applications will not use a chain with weak security
• Speculation demand drives the price until utility demand exceeds speculative demand• Especially important to new systems
• ETC is a new system• However, AMZN :)
• “Bootstrap” security of the network by rewarding early, high risk investment• Incentivize speculation / increase speculative demand
• A MP which sets out to achieve “optimal total investment” will perform better than a MP which sets out to achieve near term investment.
REASONING
GOALS & METRICS
• Simple, easy to understand, predictable• Complexity introduces risk to users, reducing trust in the policy
• Allows time for development, adoption, and awareness of implementation
• Rate resembles bitcoin model • Only generally accepted production model in crypto• Depreciating rate of production over time• Upper bound on total units• 50% distribution date• 3% inflation rate date
5M20 MODEL
• 20% reduction of all awards every 5M blocks
• Equalize uncle rewards at block 5M• More fairly distributes ETC to miners • Reduces incentive to “farm uncles”• Enables for more accurate forecasting of future upper bound• Still provides an incentive to remain on the network
MP ANALYSIS
CURRENT MP
(All Eras)5 ETC - 14.0625 ETC / block
in perpetuity
3% inflation Estimated in 2042
Almost 3x longer than bitcoin
ECIP-1017
Era 15 ETC - 14.0625 ETC / block
Blocks 1 - 5M
Era 220% reduction of rewards at block 5M
Uncle rewards equalized
20% reduction every 5M blocks thereafter
50% Distribution DateSept 2018
3% Inflation DateJuly 2025
BITCOIN MP
(Era 1) 50 BTC / Block
Halving roughly every 4 years
50% Distribution DateJuly 2019
3% Inflation DateJuly 2025
METRICS COMPARISON
ECIP-1017
Bitcoin Very Close Dates
ECIP-1017
BitcoinDates off by 10 months
But “risk” period began in Sept 2014,so add 11 months to ECIP-1017
= Dates are off by one month
METRICS COMPARISON
ECIP-1017 isn't a perfect mirror reflection of bitcoin’s model, but it provides the closest resemblance to it in key metrics while still retaining
simplicity and time for development, implementation and adoption.
Can’t occur due to time constraint
Lowest vote count
Equal acceptance rateand
sits in between 4M and 6M Block Eras
(ETCC Feedback provided by Roy Zhen aka pyds1977)
Too long, we need to start the Eras at block 4M, or sooner
Argument #1
Block 5M Block 6MBlock 4M
{Sweet Spot
{Potential
Development RiskPotential Loss of
Investor Confidence
{
Too many coins, needs to be in the 120M-150M range
Argument #2
72,002,454.77120,000,000 = 60%
72,002,454.77150,000,000 = 48%
Genesis block
86,796,809150,000,000 = 58%
Genesis block
Current≈ 18 months
Distribution of total coins occurs too soonRisk of centralization of token ownership
Optimal investment unlikely
ETC doesn’t need to resemble Bitcoin’s long, drawn out MP.That was only required because bitcoin was a new concept.
Argument #3
Any sufficiently disruptive crypto should not need to resort to changing from a known, working model (bitcoin)
Any sufficiently disruptive crypto will likely require a bitcoin length time period for the market to figure out the value proposition.
A crypto which chooses to part too far from bitcoin’s model, or at least from relevant bitcoin distribution metrics, is using MP as a crutch, a marketing gimmick, and/or as its main selling point.
Path to Implementation
Now 3M 4M3.5M3.25M
Discussion
Development
Testing
Implementation
3.75M
Adoption
Execute or
Null
13.12.16 15.01.17 26.06.1706.04.1724.02.17 16.05.17
250k blocks ≈ 40 days
Client ImplementationDrop Dead Date
Client Implementation Goal Date
Voting
Team Formation
While it is important to incentivize early, high risk investment,the monetary policy should not remain a focal point of the network.
There are enough unknowns and complexities when it comes to ETC, a monetary policy should not add to them.
3rd Party Products and Services
Monetary Policy in CryptocurrenciesJon Matonis | Alistair Milne | Edan Yago | Matt Herbert
Web: ethereumclassic.org Twitter: @eth_classic Slack: ethereumclassic.herokuapp.com