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I have a test network set up (mostly for learning purposes) using a unique network ID and seed node. After calling 'geth init' and not pre-allocating anything to any wallets, the network has no ether and no transactions are currently pending.

Question One

So, a miner starts with with miner.start(). After just a little bit of time, they're generating ether into their wallets. How does this happen? To my understanding, mining is the processes of performing the verification hashes to make a transaction go through, and they are rewarded with the transaction fees. If there are NO transactions pending, how does mining work?

Question Two

Say I wanted to pre-allocate 20% of ALL possible ether. Is there a way in the genesis file to do this? You can specify how much ether is allocated to an individual account, but you cannot specify the total available ether pool.

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Question 1

Transaction fees aren't the only reward, each mined block also creates some ether out of thin air and gives it to the miner. If there are no pending transactions, a miner will just mine a block with nothing in it.

Question 2

Unlike Bitcoin, Ethereum's mining rewards don't decrease, thus preventing a "total available ether pool" from existing. If you want one anyway, you'll have to modify the source code of the client and that's not easy.

  • Interesting, thanks for the explanation on those. So if there is ether being created out of thin air, how does the market not get over-flooded? How does Ethereum keep the value of Ether from tanking? – Peanut Jan 8 '18 at 17:14
  • @Peanut While the constant inflow of ether does cause inflation, that inflation will decrease over time because the mining reward stays constant while the total amount of ether increases. One ether means a lot when there's 10 in total, but not if there's 10 million. – Sobsz Jan 8 '18 at 17:45

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