Vitalik Buterin, the inventor of the ethereum blockchain, may have created too much of a good thing.
The 23-year-old helped sell one of the first digital currencies in 2014 when he introduced ether to the public. Three years later he’s witnessed scads of other digital currencies raise more than $3 billion in 2017 via so-called initial coin offerings. The sheer number of coins now being created has made him ponder the previously imponderable: limiting the supply of ether.
“I’m concerned a lot of these token models aren’t going to be sustainable,” Buterin said in a rare interview last week at the Ethereum Developers Conference in Cancun, Mexico.
So what’s the problem? There’s a hard limit — 21 million coins — on the supply of bitcoin, the first successful cryptocurrency, that helps underpin its value. Buterin isn’t mulling a cap like that, but he’s intrigued by the idea of imposing fees on applications built atop ethereum. Those fees would destroy — or burn, in Buterin’s parlance — ether tokens over time.
“If the token is being burned, then you have an economic model that says the value of the token is the net present value of basically all future burnings,” he said. Otherwise, “it’s just a currency that goes up and down. It feels kind of like voodoo economics and the price of the token isn’t really backed by anything,” Buterin added. “That’s a very spooky thing.” […]
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