September 25, 2020

Vitalik Buterin proposes to increase the award in the upcoming implementation of Proof of Stake

Vitalik Buterin proposes to increase the award in the upcoming implementation of Proof of Stake

In a post published on GitHub, Ethereum creator shared his opinion on the amount of remuneration of miners after the currency switches to PoS. According to Buterin, this amount should be higher than previously proposed.

Ethereum, like Bitcoin and Litecoin, works onThe Proof of Work algorithm, which requires the use of computing power to verify transactions. Users pay miners transaction processing fees, and also receive a reward for the extraction of new coins. However, PoW has its drawbacks. The algorithm stimulates the creation of huge mining pools, which increase competition for remuneration and transaction fees, which leads to an increase in computing power that facilitates the operation of the network. The end result is a massive investment of resources, both for covering electricity and equipment.

Unlike the first algorithm, Proof of Stakeuses a reward system based on the number of coins owned by users. The more coins - in this case ETH - the more they contribute to the functionality of the network, for which they receive a greater reward.

However, since Ethereum is in the process ofTransition to the PoS algorithm, miners will encounter such a proposal as the percentage of coins that should be awarded for the bet. Buterin's proposal provides for the creation of 2 097 152 ETH per year, with a total of 134 217 728 ETH. The result will be an annual dividend of 1.56% for investors - the amount seems to be small, but it will also help to avoid excessive ETH inflation.

Vitalik Buterin proposes to increase the award in the upcoming implementation of Proof of Stake

Buterin also offers a breakdown of various payouts based on ETH rates. Compared with the previous value, 1 million Ether bets will yield an income of 18.10%, and 10 million net profit 5.72%.

Justin Drake, Ethereum researcher, responded inGitHub comments on its endorsement of Buterin's algorithm. Targeting 32 million Ether, which Drake called the ideal figure for maintaining network security, investors can expect a base return of 3.2%, with Ethereum annual inflation of around 1%, which is much lower than the average inflation in the United States, equal to 3.22%.