Ethereum Classic and Crypto Monetary Policy London Event

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Information about Ethereum Classic and Crypto Monetary Policy London Event

Published on December 14, 2016

Author: arcatomia

Source: slideshare.net

1. ETC Year One and Crypto Monetary Policy Dr. Avtar Sehra @avtarsehra London Event 13 December 2016

2. 3rd Party Products and Services “Do not go gentle into that good night..” - Dylan Thomas

3. Changing an Immutable Public Blockchain The DAO, a smart contract based fund raised ~$150million from more than 11,000 investors, and was hacked, with ~$70million** being “misappropriated”. The immutable Blockchain transactions were reversed to return funds to investors through a “hard fork” on July 20th 14.30 UTC *Weakness in smart contracts was due to a reentrancy issue ** Figures based on $20=1ETH market price at time of hack

4. ● Immutable Infrastructure should be a truth machine that can not be changed no matter what the circumstances ● Neutral: Infrastructure should be neutral to transactions/ applications on it; endorsements by a central team leads to conflict of interest that skew future evolution ● Open: Infrastructure should be openly accessible by anyone to ensure scalability and minimize possibilities of risks linked to centralization Principles of a Decentralised Infrastructure

5. All key aspects of the ecosystem require a certain level of decentralization Decentralization of all aspects of ETC Ecosystem Technology • Core Dev/Support • Operations • R&D Community • Marketing • Education • Dapp Dev Administration • Governance • Finance Management • Risk Control Decentralized Infrastructure Minimizing Points of Failure

6. ● Core ETC dev team being established ● Multiple clients ported ● Execute removal of difficulty bomb ● Strategy/fix for transaction replay issue ● Assess dev of ETC Mist-like client ● Deploy independent blockchain nodes ● Grow core developer community 2016 20182017 ● Collaborate with Ethereum developers to design, dev and test core protocol updates? ● Research/test PoW/PoS mechanisms ● Research/test maximally efficient monetary policy for consensus mechanism ● Dev ETC focused Mist-like client ● Assess path to state Sharding ● Assess VM upgrades e.g. verified compiler ● Establishing communication channels for global coordination and consistency ● Setup global meetups to begin deployment of decentralised community network ● Establish framework for Dapp developers ● Defining core social contract ● Defining community-driven roadmap ● Define governance models for execution ● Design/deploy funding mechanisms ● Define monetary policy ● Execute PoW, PoS or Hybrid cons mech ● Execute appropriate monetary policy ● Test/implement state sharding ● Research/test VM improvements if deemed fit for implementation ● Further outreach to miners ● Extend meetups and conferences ● Setup of overall Dev conference ● Deployment of structured Dapp dev ecosystem and support framework e.g. hackathons and 3rd party funding Ecosystem Roadmap

7. Focus Points to Ensure Sustainability 1. Define Monetary Policy 2. Expand Core Dev Team 3. Establish Funding/Governance 4. Establish Dapp Dev Community ● Core ETC dev team being established ● Multiple clients ported ● Execute removal of difficulty bomb ● Strategy/fix for transaction replay issue ● Assess dev of ETC Mist-like client ● Deploy independent blockchain nodes ● Grow core developer community 2016 2018 TechnologyCommunityAdministration 2017 ● Align with Core ETH dev team to design, dev and test standard protocol updates? ● Research/test PoW/PoS mechanisms ● Research/test maximally efficient monetary policy for consensus mechanism ● Dev ETC focused Mist-like client ● Assess path to state Sharding ● Assess VM upgrades e.g. verified compiler ● Establishing communication channels for global coordination and consistency ● Setup global meetups to begin deployment of decentralised community network ● Establish framework for Dapp developers ● Defining core social contract ● Defining community-driven roadmap ● Define governance models for execution ● Design/deploy funding mechanisms ● Define monetary policy ● Execute PoW, PoS or Hybrid cons mech ● Execute appropriate monetary policy ● Test/implement state sharding ● Research/test VM improvements if deemed fit for implementation ● Further outreach to miners ● Extend meetups and conferences ● Setup of overall Dev conference ● Deployment of structured Dapp dev ecosystem and support framework e.g. hackathons and 3rd party funding

8. Perception of Sustainability ETC Price has Stabilized over last month as community has started to focus on monetary policy planning

9. Monetary Policy: Controlling the Supply of Money Gold and silver mining in ancient Greece; where precious metal based monetary economy replaced barter trading in seventh century BC.

10. Store of Value Functions of Money Medium of Exchange Unit of Account Store of Value: Allows purchasing power to be saved, and used in the future Unit of Account: Stable and easily divisible expression for the worth of any good or service Medium of Exchange: Accepted by all as a means to transact goods and services

11. Example of Bitcoin Monetary Policy in Action Started: Jan 3rd 2009, 18:15:05 0 coins at the start, and there is a cap of 21million coins Through process of mining, validating and “recording” new transactions in the blockchain, 50 coins were released every 10 minutes to miners (along with transaction fees) Reward of 50 coins is reduced by 50% every ~4 years. We are now on 12.5coins per mining reward By October 2140 the last Bitcoin will be mined, at which point its is expected all rewards are replaced by transaction fees

12. Store of Value Factors to Manage Cryptocurrency Monetary Policy Medium of Exchange Unit of Account Store of Value: The value of the native digital asset on the network could be managed by controlling perception of future value of the token through scarcity and supply control: • How native digital tokens enter (and exit) the system • Is there a capped or never ending supply (deflation/inflation) Medium of Exchange: Number of retailers that are prepared to accept cryptocurrencies as payment is not within the direct control of the network, but it can be nurtured: • Simple tools for interaction with network • Perception of stable and secure means of transaction Unit of Account: Parties agreeing and negotiating prices of goods and services in cryptocurrencies is challenging as it depends on the wider economic factors e.g. fiat system stability, legal and regulatory factors, but it again can be nurtured: • Value of native token is stable over time • Simple divisible and manageable units

13. Comparing BTC and ETC Monetary Policy Currency Start +UTC Starting Money Supply Supply Cap Average Block Time Start Block Reward Supply Schedule Current Block Reward Money Supply as of 5 Dec 2016 Monetary Base Model Bitcoin (BTC) Jan 3rd 2009 18:15:05 0 BTC 21million BTC 10 minutes 50 BTC 50% Reduction every 210,000 blocks (~4years) 12.5BTC 15,959,725 BTC Deflationary Ethereum Classic (ETC) Jul 30th 2015 15:26:13 60 million ETC Currently No Cap 12 seconds 5ETC (4.375 ETC for max 2 Uncles Perpetual Release 5ETC (4.375 ETC for max 2 Uncles 86,560,205 ETC Inflationary

14. 3rd Party Products and Services

15. 1. Technology Progress to Date and Next Steps by Igor Atramonov 2. Overview of Proposed ETC Monetary Policy by Matthew Mazur 3. Panel Discussion on Monetary Policy in Cryptocurrencies 4. Video Message by Carlos Graterol on ETC Twitter Sentiment

16. 3rd Party Products and Services

17. Ethereum Classic Technology Progress to Date and Next Steps December 2016 Igor Artamonov

18. How it started At block 1,920,000 (at 20 July 2016) Ethereum Classic was born In the early days people kept using the nodes without the hardfork At the beginning there were only one person who was able to maintain the Ethereum Core code - Gravity Then, a few more developers joined ETC GitHub To fork and fix Ethereum code To start new projects

19. Ethereum Classic Progress 1. ETC Community has focused on taking care of all core aspects of the network: Nodes and Wallets 2. Successfully made first protocol upgrade (Hard Fork at block 2,500,000) a. VM Operations reprice to mitigate DDoS attack 3. Implementation ready for the next fork planned for 15th of January a. Difficulty Bomb delay b. VM Operations price improvements c. Replay Protection

20. Core Projects Geth - official client implementation of the protocol Parity - 3rd party client implementation, supports both ETC & ETH Mist - official wallet for ETC

21. Additional Projects ETC Block Explorer (hosted on etherhub.io) Dapp UI SDK - Javascript components for building ETC applications EtherJar - Java tools for Dapp developers EtherKube - tools to deploy/manage ETC nodes in a cloud (Kubernetes & Docker based clouds)

22. Community The Community is the main force behind ETC decisions and development All significant changes to the protocol are made through ECIP (Ethereum Classic Improvement Proposal) process 35 members at the moment who have rights to commit Community makes code reviews for each commit into core projects Other people can send Pull Requests

23. Core Projects Team Dedicated team to work full time on Core Projects To maintain, improve and implement next versions of core projects Forming currently by Igor Artamonov Hiring Rust, Go and Javascript developers Team funded by investors who are interested in Ethereum Classic’s future ETC is also looking for additional and sustainable sources of funding

24. Core Projects Plan for Y17 Do protocol upgrade on January 15th Difficulty Bomb, Replay Protection, VM Operations Reprice Implement and test new Monetary Policy Classic Wallet (New Project) We aren’t happy with current Mist (ETH Wallet) code and we don’t think it’s worth the effort to maintain existing code, so focus is to create a new wallet from the ground up Research Hybrid Proof-of-Stake/Proof-of-Work consensus applicability to Ethereum Classic Maintain Geth and Parity

25. Overview

26. Other Teams Few other teams and commercial organizations are gathering around Ethereum Classic at the moment

27. Ethereum Classic https://ethereumclassic.github.io/ 2016 Igor Artamonov igor@artamonov.ru / splix@ethereumclassic.org Twitter @splix

28. 3rd Party Products and Services

29. ECIP-1017 Matt Mazur (snaproll)

30. Current Network Hash Rate ≈ 700 GH/s

31. • Large scale, high risk, high profile applications will not use a chain with weak security • Speculation demand drives the price until utility demand exceeds speculative demand • Especially important to new systems • ETC is a new system • However, AMZN :) • “Bootstrap” security of the network by rewarding early, high risk investment • Incentivize speculation / increase speculative demand • A MP which sets out to achieve “optimal total investment” will perform better than a MP which sets out to achieve near term investment. REASONING

32. GOALS & METRICS • Simple, easy to understand, predictable • Complexity introduces risk to users, reducing trust in the policy • Allows time for development, adoption, and awareness of implementation • Rate resembles bitcoin model • Only generally accepted production model in crypto • Depreciating rate of production over time • Upper bound on total units • 50% distribution date • 3% inflation rate date

33. 5M20 MODEL • 20% reduction of all awards every 5M blocks • Equalize uncle rewards at block 5M • More fairly distributes ETC to miners • Reduces incentive to “farm uncles” • Enables for more accurate forecasting of future upper bound • Still provides an incentive to remain on the network

34. MP ANALYSIS

35. CURRENT MP (All Eras) 5 ETC - 14.0625 ETC / block in perpetuity 3% inflation Estimated in 2042 Almost 3x longer than bitcoin

36. ECIP-1017 Era 1 5 ETC - 14.0625 ETC / block Blocks 1 - 5M Era 2 20% reduction of rewards at block 5M Uncle rewards equalized 20% reduction every 5M blocks thereafter 50% Distribution Date Sept 2018 3% Inflation Date July 2025

37. BITCOIN MP (Era 1) 50 BTC / Block Halving roughly every 4 years 50% Distribution Date July 2019 3% Inflation Date July 2025

38. METRICS COMPARISON ECIP-1017 Bitcoin Very Close Dates

39. ECIP-1017 Bitcoin Dates off by 10 months But “risk” period began in Sept 2014, so add 11 months to ECIP-1017 = Dates are off by one month METRICS COMPARISON

40. ECIP-1017 isn't a perfect mirror reflection of bitcoin’s model, but it provides the closest resemblance to it in key metrics while still retaining simplicity and time for development, implementation and adoption.

41. Can’t occur due to time constraint Lowest vote count Equal acceptance rate and sits in between 4M and 6M Block Eras (ETCC Feedback provided by Roy Zhen aka pyds1977)

42. Too long, we need to start the Eras at block 4M, or sooner Argument #1

43. Block 5M Block 6MBlock 4M { Sweet Spot { Potential Development Risk Potential Loss of Investor Confidence {

44. Too many coins, needs to be in the 120M-150M range Argument #2

45. 72,002,454.77 120,000,000 = 60% 72,002,454.77 150,000,000 = 48% Genesis block 86,796,809 150,000,000 = 58% Genesis block Current ≈ 18 months Distribution of total coins occurs too soon Risk of centralization of token ownership Optimal investment unlikely

46. ETC doesn’t need to resemble Bitcoin’s long, drawn out MP. That was only required because bitcoin was a new concept. Argument #3

47. Any sufficiently disruptive crypto should not need to resort to changing from a known, working model (bitcoin) Any sufficiently disruptive crypto will likely require a bitcoin length time period for the market to figure out the value proposition. A crypto which chooses to part too far from bitcoin’s model, or at least from relevant bitcoin distribution metrics, is using MP as a crutch, a marketing gimmick, and/or as its main selling point.

48. Path to Implementation

49. Now 3M 4M3.5M3.25M Discussion Development Testing Implementation 3.75M Adoption Execute or Null 13.12.16 15.01.17 26.06.1706.04.1724.02.17 16.05.17 250k blocks ≈ 40 days Client Implementation Drop Dead Date Client Implementation Goal Date Voting Team Formation

50. While it is important to incentivize early, high risk investment, the monetary policy should not remain a focal point of the network. There are enough unknowns and complexities when it comes to ETC, a monetary policy should not add to them.

51. 3rd Party Products and Services Monetary Policy in Cryptocurrencies Jon Matonis | Alistair Milne | Edan Yago | Matt Herbert

52. Web: ethereumclassic.org Twitter: @eth_classic Slack: ethereumclassic.herokuapp.com

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