Unveiling ECIP-1017: The Ambitious Motivations Behind Ethereum Classic's Monetary Policy - PART 1
Exploring the vision for ECIP-1017
In exploring the intricacies of Ethereum Classic's monetary policy and its perceived shortcomings, it becomes imperative to delve into the motivations behind ECIP-1017 [1]. This article, part of a series, aims to dissect the intentions and expectations set forth by ECIP-1017, allowing us to better grasp the context before delving into an analysis of its outcomes.
ECIP-1017 was crafted with a multifaceted vision that sought to address various facets of the Ethereum Classic network. In particular, it aimed to achieve the following objectives:
1. Enhancing Network Security:
By increasing the security of the network, a proper monetary policy indirectly nurtures the network, providing a secure platform for which smart contract development will be more likely to occur.
2. Rewarding Speculation to Boost Demand:
Rewarding speculation will help to secure and nurture the network.
Increasing demand for the Ethereum Classic token will, all else being equal, increase the price of the Ethereum Classic token.
3. Attracting High-Profile Applications:
Large scale, high risk, and/or high profile applications will be less likely to be developed on a blockchain with weak security... An increase in the security of the network assists in building trust between the network and both current and potential users and developers of the network.
4. Incentivizing Mining Operations:
An increase in the price of the token incentivizes mining operations to direct their efforts on the Ethereum Classic Network or to begin operations on the Ethereum Classic Network.
5. Building Trust and Community:
An increase in the security of the network assists in building trust between the network and both current and potential users and developers of the network.
A stable platform with useful applications and a vibrant community are the variables that drive value.
6. Encouraging Early-Stage Speculation:
Especially important to early stage cryptocurrencies, a network with a decreasing rate of production and an upper bound on the number of tokens... will provide more incentive for high risk speculation to occur than one without a known rate of production or an upper bound.
7. Balancing Risk and Reward:
The purpose of a properly structured monetary policy is to create an incentive for people to take a risk on a system that has not yet reached its full potential.
8. Long-Term Sustainability:
The 5M model provides a balance between providing an acceptable depreciating distribution rate for rewarding high risk investment into the system and maintaining an active supply production over time.
9. Fairness in Reward Distribution:
By equalizing the rewards to uncle block miners with the rewards to miners who include an uncle block, the reward structure is more fairly distributed.
Equalizing the uncle rewards reduces the incentive for miners to set up an ETC 'uncle farm.
10. Facilitating Forecasting of Total Supply:
Because the rate at which uncled blocks can vary with extreme, reducing the reward for uncle blocks assists considerably with being able to forecast the true upper bound of the total ETC that will ultimately exist in the system.
11. Balancing Development Time and Incentives:
Having the monetary policy begin at 5M provides a balance between delaying the implementation to provide enough time for code development and testing, and accelerating the implementation to provide an incentive to potential early adopters and high-risk investors.
By comprehensively examining these motivations, we can set the stage for a nuanced exploration of how ECIP-1017 played out in practice and whether it lived up to its intended outcomes.
Sources:
Proposals, E. C. I. (2016, November 20). Monetary policy and final modification to the Ethereum Classic emission schedule. Ethereum Classic Improvement Proposals. https://ecips.ethereumclassic.org/ECIPs/ecip-1017