Ethereum's Recent Decline in Hashrate 'Not Surprising': Cyber Threat Expert Explains

Anthony Sassano, a “cyber threat detection expert” and active contributor to the Ethereum project, observed recently that the ETH price “double bottomed” at around $80 on December 15th 2018.

Sassano, an experienced cybersecurity professional and co-founder of EthHub, a Melbourne, Australia-based organization that focuses on “open source, community-driven Ethereum research,” revealed via Twitter some important Ethereum metrics since mid-December 2018:

Key Ethereum Metrics Since Mid-December 2018

As pointed out by Sassano in his detailed Twitter thread, the number of active Ethereum addresses “actually bottomed at ~177k on Feb 16th 2019.” Moreover, the 24-hour transaction count on the Ethereum blockchain “bottomed at 438k on Feb 16th 2019 as well,” Sassano revealed.

The online security researcher further noted: “Curiously, Feb 16th-23rd 2019 is when the price of ETH increased from $120-$160.”

Ethereum’s Network Usage Has Remained At Or Above 60% “Since Nov 2017”

According to Sassano’s assessment, Ethereum’s “network usage tends to fluctuate wildly due to a variety of conditions and depends on what kind of activity is happening on the network on that day (ICO, big price movements, airdrop etc).” Given that multiple different factors may determine the level of activity on Ethereum’s blockchain, Sassano mentioned that the smart contract platform’s “network usage has not dipped below 60% since Nov 2017.”

Why Ethereum’s Recent Hashrate Decline Is “Not Surprising”

Sassano continued: “The overall hashrate decline is not surprising given the fact that rewards were reduced by ~31% as part of the latest issuance reduction. Plus, investing in mining on Ethereum is a short-term game given the switch to proof-of-stake (PoS) and eventual sunsetting of the Eth1.0 chain.”

Commenting on the Ethereum community’s decision to experiment with programmatic proof-of-work (ProgPoW), Sassano remarked:

I'm also curious to see what happens to the hashrate if ProgPoW is merged into the next network upgrade (Istanbul). I'm personally not expecting a huge drop off & we may see it level out due to GPU miners coming back online. This also depends on the price of ETH, of course.

Bitcoin Proponents Debate a Potential Hard Fork for Inflation

  • Bitcoin Advisory founder Pierre Rochard is asking bitcoin community to consider the implementation of inflation.
  • Rochard argues that transaction fees alone may not be enough to sustain miners in the future. 

Pierre Rochard, founder of consulting firm Bitcoin Advisory, has addresed a debate in the bitcoin community over whether transaction fees will be high enough to support the network’s continued use. 

Bitcoin Inflation Debate

According to Rochard, who is also a self-proclaimed proponent of BTC’s scaling solution lightning network, the community must question whether transaction fees alone will be enough incentive for miners in the future. As outlined in the original white paper, bitcoin’s total supply is limited to 21 million coins. 

While the final BTC is not expected to be minted until after the year 2140, the block reward will continue to decline over the coming century. Miners, who facilitate transactions and secure bitcoin’s network, will have to rely more upon transaction fees as a source of income, as BTC rewards continue to fall.

Some are now arguing that bitcoin may need to introduce perpetual inflation to remedy the situation, which would mean altering the original 21 million BTC total supply.

Rochard said, 

There’s an open question of will transaction fees be high enough – or in the aggregate total – enough to provide transaction finality...will bitcoin have to hard fork in inflation?

The Bitcoin Advisory founder asked the community to consider the state of altcoins, many of which operate on an inflationary protocol. Rochard acknowledged that confirmation bias may be clouding judgment in regard to bitcoin’s managed development and that the potential for inflation should at least be considered, 

There’s confirmation bias. We’re all very bullish on bitcoin, I certainly am, and so we want to pick out arguments and facts that support our position rather than trying to see all sides of a debate and have a more balanced view. Or at least have some level of uncertainty and self awareness in how much support we actually have for our arguments.

Future of BTC

Rochard pointed to an article written in 2015 by Silicon Valley entrepreneur Ryan Selkis, under the name TwoBitIdiot, arguing that bitcoin needed inflation despite the controversy of the idea. He also pointed to the increase in block size from 1MB, which at the time was considered blasphemous to bitcoin’s protocol, as analogous to the idea of introducing inflation. 

Rochard concluded that the bitcoin community has “a good 10 to 20 years to argue about it,” before inflation becomes a pressing issue. 

 

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