On a day when the cryptocurrency community was on high alert for gags, whimsical announcements and other tomfoolery, the creator of Ethereum, known for pulling his own pranks in the past, stepped forth with a most serious proposal: setting a cap on Ethereum’s monetary supply — which has long had no cap at all — at 120 million.
On April 1, 2018, a day known as April Fools’ Day, Vitalik Buterin published Ethereum Improvement Proposal (EIP) 960 to limit the supply of ether (ETH) to 120,204,432 — twice the amount issued in the project’s presale in 2014. To those paying close attention, the proposal was listed under “meta,” a hint that this was a meta joke, meant to leave people scratching their heads and wondering if he was being serious or not.
All meta joking aside, the proposal recommends implementing the cap as part of a hard fork when the platform switches from its proof-of-work consensus algorithm to Casper, a proof-of stake algorithm still in development, as early as the end of this year.
“In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, and in light of the fact that issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal, I propose that we agree on a hard cap for the total quantity of ETH,” the proposal states.
This is the first time Buterin has suggested setting a limit on Ethereum’s supply of ether.
Why set a Cap?
Some argue that a supply limit is important to a cryptocurrency because it creates scarcity, making a “coin” more valuable, sort of like gold. Yet, a hard cap can also mean there is no way to replenish the supply when coins fall out of circulation due to people dying, losing them or even holding on to them.
Unlike Bitcoin, which has a supply limit of 21 million coins programmed into it, Ethereum has never had a monetary cap, which means over time the number of ether in the system could go up indefinitely.