Research Summary
The report discusses the complexities of calculating Ethereum’s total supply due to its multi-layered system and recent upgrades. It also highlights the importance of accurate supply calculation for wealth dispersion, market capitalization, and index creation. The report suggests the need for a unified method to calculate Ethereum’s supply and calls for consensus within the Ethereum community.
Key Takeaways
Ethereum’s Evolution and Complexity
- Ethereum’s Upgrades: Ethereum has undergone significant upgrades, including EIP-1559 and The Merge, which have made the system more complex. These upgrades have moved Ethereum closer to supporting over a billion users and have transformed the system into a modular, multi-layered system.
- Complexity in Calculating Ethereum’s Supply: The complexity of Ethereum’s system has made it challenging to calculate its total supply. The supply of Ethereum’s native currency, ether (ETH), now exists in two distinct systems: the “Execution Layer” and “Consensus Layer”. Tracking the supply of ETH requires careful evaluation of these two systems.
Importance of Accurate Supply Calculation
- Impact on Wealth Dispersion and Ownership Concentration: An accurate measure of supply is essential for calculating wealth dispersion and ownership concentration. A smaller or larger denominator can significantly impact the results.
- Role in Market Capitalization and Index Creation: The total supply figure plays a crucial role in determining an asset’s market capitalization and, in turn, the weightings of ETH in a value-weighted index.
Trade-off Between Complexity and Transparency
- Bitcoin vs. Ethereum: The report highlights the trade-off between complexity and transparency in different blockchain ecosystems. Bitcoin favors ease of audibility, while Ethereum focuses on an ambitious development roadmap. The rapid pace of Ethereum’s ecosystem doesn’t leave much room for focusing on improving supply auditability.
Future of Ethereum’s Supply Calculation
- Need for Consensus: The report calls for consensus within the Ethereum community on the methodology for calculating Ethereum’s supply. It suggests the need for a single remote procedure call (RPC) endpoint or method for this purpose.
Actionable Insights
- Understanding Ethereum’s Complexity: Stakeholders should familiarize themselves with the complexities of Ethereum’s system, including its multi-layered structure and recent upgrades, to better understand the challenges in calculating its total supply.
- Monitoring Developments in Ethereum’s Supply Calculation: Stakeholders should closely monitor developments in the Ethereum community’s efforts to reach a consensus on the methodology for calculating Ethereum’s supply. This could have significant implications for wealth dispersion, market capitalization, and index creation.
- Exploring Blockchain Data Tools: Stakeholders should explore emerging blockchain data tools like Cryo, which could potentially improve the accuracy of Ethereum’s supply calculation.
