Ethereum Classic to undergo block reward reduction amid market uncertainty

Ethereum Classic will undergo its second block reward reduction from 4 ETC to 3.2 ETC on Mar. 16, with the arrival of block number 10,000,000. The network's block reward gets programmatically cut by 20% every five million blocks (roughly 2.25 years) per ECIP-1017, an improvement proposal accepted three years ago. The proposal gave Ethereum Classic a more rigid and well-defined monetary policy to help further distinguish itself from Ethereum following their split via The DAO fork.

The ETC block subsidy will continue to decrease by 20% every five million blocks until the supply hits its upper limit of 210,700,000 tokens.

On a separate note, the chart above shows an interesting development following the network's first block reward reduction on Dec. 11, 2017. Ethereum Classic block times began to noticeably increase in early 2018 due to the network's inherent Difficulty Bomb, which had a near-equal but opposite effect on the daily issue of new coins. The Ethereum Classic community opted to remove the Difficulty Bomb altogether by activating ECIP-1041 via another hard fork on May 29, 2019. The upgrade immediately returned the network to its expected block times and issuance schedule.

Why it matters:

• The timing of Ethereum Classic's reward reduction is far from ideal. The crypto markets are slowly recovering from a tumultuous day yesterday amid concerns about the coronavirus pandemic. This drawdown could amplify the effects of the block reward reduction, especially those related to the breakeven price for ETC miners. As the pool of available revenue decreases alongside price, smaller operations could be forced off of the network, making Ethereum Classic more susceptible to another 51% attack.
• Ethereum Classic's fixed monetary policy contrasts with the more flexible approach taken by Ethereum. The ETC community hopes developers might prefer a network backed by an asset with a limited supply and a more well-understood issuance schedule. But monetary policy alone might not be enough to win developer mindshare from Ethereum. Projects appear to gravitate more towards networks with a robust set of developer tools and an active ecosystem.

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