- In accordance with Ethereum Classic monetary policy, the network will have a reduction in its block reward from 4 ETC to 3.2 ETC when it reaches block 10 million.
- Due to the high volatility and negative performance of the crypto market, the Ethereum Classic network could lose miners and become vulnerable to a 51% attack.
The Ethereum Classic network will have its second block reward reduction today, March 16. It will take place when the network reaches block number 10,000,000. At the time of publication, the network is in block number 9,994,572. The block reward will have a 20% cut from 4 ETC to 3.2 ETC.
Ethereum Classic’s monetary policy provides for reductions every 5 million blocks or 2.25 years. This policy was adopted 3 years ago with the adoption of the ECIP 1017 proposal. Its implementation aims to distinguish Ethereum Classic from Ethereum and to set a limit for the total emission of ETC. The total volume of ETC will be approximately 210 million ETC. The reward reduction also seeks to balance the long-term interests of investors, developers, and business operators.
Another objective of the proposal is to “bootstrap” the security of the Ethereum Classic network. In theory, this will be achieved by setting a limit on the amount of tokens issued and decreasing the emission rate of ETC. The network is supposed to become more attractive for mining operations while Ethereum is switching to a Proof of Stake consensus. The proposal states the following:
(…) speculation will drive the value of the Ethereum Classic token until the utility value of the Ethereum Classic token exceeds its speculative value, it is reasonable to assume that rewarding speculation will help to secure and nurture the network.
Impact of block reward reduction on the safety of Ethereum Classic
Regardless of what the proposal says, the crypto market is in a moment of high volatility and negative performance. Due to the coronavirus, Bitcoin and all major cryptocurrencies have experienced significant price declines. Therefore, a reduction in block rewards could have a negative effect.
If the block reward is reduced and the ETC price falls, mining companies may exit the Ethereum network. The network could lose its profitability and experience a decrease in hash rate. This would leave the Ethereum Classic network vulnerable to a 51% attack. If this happens, it would be the second 51% attack the network has experienced since its inception.
The price of the Ethereum Classic is at $4.19, at the time of publication, with a 7.93% loss in the last 24 hours. In the weekly and monthly graphs, the ETC is posting losses of 32.58% and 63.91% respectively. It remains to be seen what the miners’ reaction will be after the reduction of the block reward.
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