sharing-Long Term Impact of EIP-1559 Simply Explained

Long Term Impact of EIP-1559 Simply Explained
By: Fabian Klauder


July 27, 2021 at 12:39AM Link: https://ift.tt/373UPbb

Contents



Hey DEFI TIMES community,

Last week, we talked about the possible long and short-term effects of EIP-1559

We said that EIP-1559 will probably cause hype in the short run. But apart from that, it will probably be a non-event.

However, in the long run, it could change the Ethereum ecosystem forever!

After several months or even years, the supply reduction will have lasting effects on the scarcity of ETH. ETH will become deflationary!

It’s very similar to the Bitcoin halving: When did the halving impact the market? Right, only months afterward.

Today, we focus on the long run of EIP-1559!

And it turns out that we have a great simulator by the Ultra Sound Money Twitter account to measure what’s going to happen.

So let’s try out some scenarios and adjust some parameters to find out how much ETH could truly be burned in the future!

But what are the parameters that are important to consider? And with how much weight do they impact the number of burned ETH?

Let’s find out!


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Long Term Impact of EIP-1559 Simply Explained

EIP-1559 is set to launch in a little more than two weeks. What happens afterward is yet a mystery.

Source: Ultrasound.money (https://ift.tt/3r1AJrd)

But it turns out that we have great models to estimate what is going to happen. One such model is from Ultrasound.money, a well-known Twitter account focused on the meme Ultra Sound Money, which was popularized by Bankless!

This model tries to predict the ETH supply based on the following parameters:

  • Staking Amount: The long-term ETH supply heavily depends on the amount of ETH staked in the validator contracts. After Ethereum successfully switches to Proof-of-Stake, the number of ETH will influence the annual issuance of the currency. That means, with Proof-of-Stake, ETH won’t have a fixed inflation rate anymore. The inflation rate will depend on how many ETH are staked to secure the network. Important: The more ETH are staked, the higher the inflation rate. For example, if only 1,000,000 ETH are staked, the inflation rate will be 0.17%. On the other hand, if 100,000,000 ETH are staked, the inflation will be 1.71%. What’s important to note is that, in both cases, inflation will be lower than today. Proof-of-Stake will significantly lower ETH issuance!

  • Gas Price: This is probably the most crucial parameter influencing the long-term ETH supply. Simply said, the higher the gas price the more ETH will be burned. Why? Because the majority of transaction fees will be burned under EIP-1559. The higher the transaction fee is, the quicker ETH becomes deflationary. That’s why we want fees to be high. We want Ethereum to be used so we can burn as much ETH as possible… ultimately reducing the ETH supply to an absolute minimum. This is music to the ears of every ETH maxi 😉

  • Merge Date: Of course, it also matters when Proof-of-Stake will go live. The inflation rate will significantly decrease after the Merger, which means it’s important to consider the actual date of the Merger. It will make a big difference whether the Merger will happen in January 2022 or January 2023!

With that said, let’s explore some possible scenarios. In the following examples, I will focus on adjusting different average gas prices.

I will assume that the merger will take place in February 2022 because this is the most likely scenario for me. I will also fix the amount of ETH staked to 20 million, which I find reasonable!

Conservative Approach

  • Staking Amount: 20 Million ETH

  • Gas Price: 20 gwei

  • Merge Date: February 2022

Source: Ultrasound.money (https://ultrasound.money/)

Now, let’s take a look at a rather conservative projection of EIP-1559’s impact. I have set the gas price at 20 gwei, which is rather low. To compare, 20 gwei is approximately the average gas price today. As Ethereum isn’t used much today, this is a rather pessimistic approach.

As you can see, with a gas price of 20 gwei, ETH’s supply basically stays the same over time. It’s constant at 119.3 million ETH.

That means at 20 gwei and above… ETH becomes deflationary!

And this is conservative! Let’s see what happens above!

Moderate Approach

  • Staking Amount: 20 Million ETH

  • Gas Price: 50 gwei

  • Merge Date: February 2022

Source: Ultrasound.money (https://ultrasound.money/)

With a gas price of 50 gwei, things start to get interesting. When we reach a long-term gas price of 50 gwei, we start to see noticeable and consistent deflation.

That would mean that 5,000 ETH would be burned per day while only 2,000 ETH are issued! This would imply a net issuance of -3,000 ETH daily!

Per year, a little over 1 million ETH would be burned… gone forever!

Optimistic Approach

  • Staking Amount: 20 Million ETH

  • Gas Price: 100 gwei

  • Merge Date: February 2022

Source: Ultrasound.money (https://ultrasound.money/)

If gas prices tend to go higher and higher, we could enter a true deflationary environment. At an average gas price of 100 gwei, approximately 10,000 ETH would be burned daily, which would lead to a net issuance of -8,000 ETH per day.

Almost 3 million ETH would be burned per year. That’s around 2.5% of Ethereum’s total supply!

Crazy stuff!

Conclusion

After the merge, ETH will most likely become deflationary. Even at 20 gwei, the supply stays constant – and there’s a good chance we will cross this threshold!

What’s pretty cool with EIP-1559 is that high gas prices are going to be a good thing! The higher the gas prices the more scarce ETH becomes. Whenever you hear someone complaining about high gas fees, this person most likely doesn’t hold ETH 😉

Another thing that’s interesting is that ETH will probably never cross the 120 million supply mark.

EIP-1559 makes it possible!


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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article’s content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.



sharing-Weekly Staking and Farming Review — 22nd July 2021

Weekly Staking and Farming Review — 22nd July 2021
By: /u/smileycrypto


July 27, 2021 at 12:19AM Link: https://ift.tt/371qkTj

Contents


Weekly Staking and Farming Review — 22nd July 2021

About your author: CryptoQuestion is an independent platform providing free resources for cryptocurrency investors. From an on-demand Q&A service to online courses, from books to our weekly Moonshot Monday podcast. Visit us at www.cryptoquestion.tech

https://cryptoquestion.tech/stakingandfarming/

When entering the world of staking and yield farming there are a number of considerations investors must bear in mind. Today we are going to look at some of those important considerations and the most relevant terms and definitions you should know. We are also researching what we call the underbelly of the staking and farming industry. If you are an avid watcher of some of the YouTube staking shows, you will know what I mean!

This is the subsection of the staking and farming market, which searches for the highest APRs available, no matter what. To achieve this objective, they target many of the smaller and newer platforms. Platforms with names like DojoFarm, JungleSwap, Scarab, Lumberjack, Twilight. Don’t try looking for these tokens on Coin Gecko or CoinMarketCap, as you will, in most cases, be wasting your time.

This collection of misfits are staking and farming platforms that offer big yields but are not mainstream by any means. Many of them have TVLs below $1 million.

Going native or not

One of the first decisions you have to make is whether you want to buy the native token of the platform and stake it. You also have to decide if you are happy to receive your rewards in that token. Checking the price chart on their website isn’t going to give you all the answers you need. You will need to assess how liquid the token is. If the liquidity is only a few thousand dollars, then that limits your options somewhat.

Going for higher APRs

Many investors are chasing the highest APRs. Let us explain why that isn’t the best strategy. Let’s take JungleSwap, for example.

If you stake the token Jungle, the APR is 154%. You are paid in Jungle tokens. The problem is when you check out PancakeSwap you see that the volume over the last 24 hours is only $730. Yes, we all have to start somewhere, and some of these early-stage platforms may well be the next PancakeSwap, but be wary and understand the risks behind these micro platforms.

Transfer tax

Many platforms charge a transfer tax. Check this out before investing. This can be around 5%.

Deposit fees

Some platforms charge a deposit fee. This is usually not charged when you stake the platform’s currency but is when staking tokens other than the platform’s. A clever incentive to guide investors into their native currency. This is usually around 4%.

Rug pulls

Every investor with knowledge of crypto has heard of the risk of a rug pull. When the investors dump all their tokens leaving the other token holders with coins worth less than a bag of rocks. It is now fashionable for projects to have an independent company assess their chances of a rug pull. The leader in this field is RugDoc, who performs something called a RugDoc Review. These can never be totally relied on, but they do give some comfort as the project owners have to provide KYC and are therefore not able to disappear into the sunset without consequences. Check that the platform has this. However, just because a platform features the RugDoc logo doesn’t mean your money is safe. It didn’t stop the devs at Lumberjack Finance from pulling all its liquidity right before farming started.

Checking the docs

Always check the docs on each platform. This will reveal tokenomics, fees, timelocks, and burns.

The devils in the detail

Let’s take a look at DojoFarm. It is offering 1192% APR for staking its token DOJO, paid in DOJO. The DOJO token had $3364 of volume in the last 24 hours. There is no deposit fee payable. The market cap of the project is under $20k. In effect, you are lending money to these platforms and are agreeing to be repaid in beans. These beans are unlikely to be magic beans. We say unlikely because stranger things have happened.

Harvest lockup

This is when tokens are locked for a period of time from 1 day to over a week. Let’s take an example here. Scarab Farm, a small yield farming platform with only a few hundred thousand dollars of TVL, offers 67,112% APR if you stake Scarab and BUSD for 96 hours. No deposit fee. Paid in Scarab. The APR wasn’t a typo!

Conclusion

If you are tempted by 67,000% APRs remember there is another side to the equation. If you are treating this as a bit of fun and you have time to spare and under $100 to invest, then maybe you could make a few bucks, but it is time-consuming maneuvering among the various platforms trying to avoid the rug pulls and attempting to sell your tokens. If this is your bag, then we are not here to deter you. Hopefully, this review will make us all wiser investors.

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sharing-An overview of fixed-rate products

An overview of fixed-rate products
By: Eden Au


July 27, 2021 at 12:16AM Link: https://ift.tt/3iNNBh2

Contents


20210719_Overview_Of_Fixed_Rate_Products

Quick Take

  • Aave offers fixed-rate borrowing services, but the rate could still change under extreme market conditions
  • Fixed-term lending is slowly gaining traction in DeFi, although their demand is nowhere near established lending markets
  • Interest rate swap in DeFi is still in its infancy
  • Yield tranching is a technique that splits yields into tranches with various risk profiles, and most liquidity enters the riskiest tranche

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.


sharing-Ethereum 2.0: improvement proposal for chain merger formalized

Ethereum 2.0: improvement proposal for chain merger formalized
By: Marco Cavicchioli


July 24, 2021 at 08:30AM Link: https://ift.tt/2VaCFlj

Contents


Ethereum improvement proposal

Yesterday, the Ethereum Improvement Proposal (EIP), which calls for the merger of the two chains, was formalized for the first time.

👀https://t.co/Wem68y49sW👀

— dannyryan☀ (@dannyryan) July 22, 2021

In fact, as of today, besides the traditional blockchain, the one called “1.0”, active since 2015 and based on Proof-of-Work (PoW), there is another one, called Beacon Chain and still in an experimental phase.

Beacon Chain was launched in December 2020, and is based on Proof-of-Stake (PoS). It will form the definitive Ethereum blockchain when the final transition to version 2.0 takes place.

Proposal 3675 formalizes precisely the proposal to merge the two chains, so as to definitively move from PoW to PoS, thanks to the merging of the old chain with the new one.

It was launched yesterday by ConsenSys researcher Mikhail Kalinin, after it had been discussed during the recent Ethereum Core Devs Meeting with developer Tim Beiko.

The proposal will now have to be considered by the Ethereum community, and if accepted will not only allow transactions to be validated with PoS, instead of PoW, but will also shift this activity from miners to stakers.

The new EIP itself reveals that no problems have emerged since the launch of Beacon Chain in December 2020, so the long period of failure-free operation demonstrates the sustainability of the new system.

To date, there are over 6.5 million ETH staked on the Eth2 testnet, with a total value of almost $13.5 billion. In addition, there are already almost 200,000 validators on Eth2.

As a matter of fact, even though Eth2 is still in the testing phase, it is already the second-largest PoS network in the world in terms of the total capitalization of tokens in staking, behind Cardano alone ($24.2 billion), and ahead of Solana ($10.2 billion) and Polkadot ($9 billion).

Merging the chains: the content of the Ethereum Improvement Proposal

Despite this, many consider it highly unlikely that the merger of the two chains will take place as early as 2021, including Vitalik Buterin himself.

The size, spread and importance of Ethereum are now too great to afford a problematic launch. Everything will have to go substantially right, and in these cases, caution is a must.

It is not surprising, therefore, that this crucial and epoch-making step will take place slowly, or in any case without any hurry, so that it can be carried out in full security, and with reasonable certainty that everything will work as planned.

 

The post Ethereum 2.0: improvement proposal for chain merger formalized appeared first on The Cryptonomist.


sharing-State of Stake vol. 53

State of Stake vol. 53
By: Paradigm


July 23, 2021 at 11:55AM Link: https://ift.tt/3BA1WGi

Contents


Paradigm’s biweekly update on Proof-of-Stake ecosystem, 8th July — 22nd July

  • Vitalik Buterin talks on the future of Ethereum on EthCC
  • The Gravity DEX protocol is finally live, marking the biggest stride forward for Cosmos to date
  • Learn why auctions are better run on-chain than off-chain and why a candle auction is a central feature of the Kusama network and Polkadot.
  • Chainlink price feeds are live on Avalanche mainnet, paving wave for advanced DeFi apps. AVAX staking via delegation is now live on Stake DAO
  • Cardano’s Daedalus: from launch to Flight and beyond
  • BandChain Laozi mainnet upgrade — post-mortem
  • 2 year anniversary of Algorand mainnet
  • Tezos Protocol upgrade Granada is in the final stages, contract calls are on track to reach another record high, and the DeFi and NFT landscape are continuing to grow
  • The Synthetix exchange will be enabled on Optimism during the week of July 26th with a final deployment date pending Spartan Council approval
  • PayU purchases CELO tokens to kickstart stablecoin payment program
  • Bluzelle partners with PolkaFoundry to accelerate DeFi adoption through intuitive oracle and NFT solutions
  • Polygon Studios has been presented, a brand new Polygon’s arm for the Blockchain Gaming & NFT ecosystem. This will cement Polygon’s existing lead position as the de-facto platform for NFTs & Gaming.
  • The UpOnly exchange is live, one of the first Injective relayers to go public and aims to provide a sleek interface for decentralized derivatives trading
  • The ICE Blockchain introduced, a new EVM compatible blockchain for the ICON ecosystem
  • The Graph Foundation to provide over $2.8M in funding to grants, in addition to $60M Core Dev Grant to StreamingFast
  • Terra’s new $150M Ecosystem Fund introduced
  • 1inch Foundation launches a $3 million grant program
  • Neon, an Ethereum Virtual Machine (EVM) scalability solution built on Solana, introduced
  • Hop Protocol released their multichain bridge connecting xDai, Ethereum and Polygon
  • 0x + Brave partner to make crypto and DeFi more accessible to everyone
  • The Filecoin Techstars Accelerator announced
  • Revival NFT Marketplace is officially live on IOST
  • Persistence and IRIS Network join forces on multiple fronts
  • Learn what the NEAR Foundation does
  • And more!

Top 10 Crypto Assets by Staked Value

Source: Staking Rewards

Proof-of-Stake Networks’ Updates

Ethereum 2.0

 — @WeekInEthNews

Check out our recently-published ‘Defi in Ether’ — biweekly update on Ethereum DeFi ecosystem vol.34 full of news from the ecosystem: $54B in DeFi, Uniswap v3 on Optimism, Synthetix x Optimism update, TokenSets launches on Polygon, Gnosis Safe is live on Layer 2, Hop Bridge is here, 0x + Brave partner up, KyberDMM liquidity mining now live, Balancer launches Stable Pools, SushiSwap NFT platform sneak peek, and much more!

Polkadot

  • Research Update: The Case for Candle Auctions: Parachain auctions are a central feature of Kusama network and Polkadot. Their outcome determines who gets which parachain slots and the amount of tokens locked. Learn why are auctions better run on-chain than off-chain and why a candle auction is used.

Research Update: The Case for Candle Auctions

  • Nominating and Validator Selection on Polkadot: Jonas Gehrlein, Research Scientist at W3F, has written a good overview of nominating and validator selection and the rationale behind it.
  • Khala Network won the 4th slot with 132,280 KSM bid, and it is now officially the 4th commercial parachain on Kusama.
  • Web3 Foundation is celebrating its 10th round of grants accepted through its Open and General Grants programs. With 27 new grant agreements signed in the second quarter of 2021, they are now nearing close to 300 grantees since the beginning of the Foundation’s grants program in 2019.

 — @Polkadot

 — @BillLaboon

Feel free to read our latest biweekly report on the Polkadot ecosystem vol.15: Shiden successfully won the third auction on Kusama, Khala won the fourth, Genshiro and Robonomics prepare for the next auctions wave, The Altair crowdloan is now live, polkaBTC becomes interBTC, The 1st Polkadot & Kusama <> BSC bridge is live on the testnet, Dock’s Proof-of-Stake mainnet is live, KILT Protocol shifts to LDPos, and more!

Avalanche

Preparing for the Next Generation Avalanche Bridge (AB)

 — @WeekInAvalanche

Algorand

 — @Algorand

Cardano

 — @CardanoSource

Cosmos Network

 — @adriana_kalpa

Check out our latest biweekly update on Cosmos ecosystem vol. 52 covering the following topics: The Gravity DEX protocol is live, Emeris introduced, The HackAtom HCMC winners announced, Interchain Foundation collabs with BlockScience, UFC partners with Cryptocom, Persistence and IRIS Network join forces, Injective’s Canary Chain launches, New ‘IBC Explained to Cosmonauts’ series, and more!

Tezos

The Baking Sheet – Issue #57

Synthetix

 — @snxgrants

Akash Network

 — @akashnet_

Celo

 — @CeloOrg

COTI

 — @COTInetwork

Band Protocol

Bluzelle

 — @BluzelleHQ

Elrond

 — @ElrondNetwork

Filecoin

  • Filecoin News 22: Announcing the Filecoin Techstars Accelerator, Starling Labs featured on BloombergTV, SNARKs website launch, and more!
  • Building Businesses for the Future of the Decentralized Web: Outlier Ventures CEO & Founder Jamie Burke and Protocol Labs Ecosystem Lead Colin Evran talking about the business opportunities of decentralized storage in the future of Web3 and the role that the recently-announced Filecoin Base Camp by Outlier Ventures plays.
  • Open Web Community Summit: The Future of Storage Capacity: Dystopia Labs recently hosted the Open Web Community Summit for Creators & Community, co-presented by NEAR Protocol and Gitcoin. The event mainly focused on NFTs and featured 50+ speakers and dozens of artists and creators from all over the world.
  • Filecoin zk-SNARKs: Zero Knowledge — but a Lot of Zero Knowledge: CryptoComputeLab created a beautiful zk-SNARKs for the world minisite, showcasing that Filecoin is the largest deployed zk-SNARK network to date and highlighting the key improvements that allowed a deployment of this scale.

 — @Filecoin

The Graph

 — @grt_iq

Injective

 — @InjectiveLabs

IRIS Network

  • Find the latest IRISNet proposals here.

 — @irisnetwork

Icon

  • The ICE Blockchain: A new EVM compatible blockchain for the ICON Ecosystem. Here are further details on a brand new blockchain project coming to the ICON community. This new blockchain, called ICE, will bring about a new application hub for the ICON ecosystem. Upon completion, ICE will provide developers better tooling, EVM and eWASM compatibility, and immediate access to the growing ETH & Polkadot ecosystems. It also represents a shift in the direction of the ICON project by separating functionality, product targeting, and the purpose of each of these respective networks.
  • ICON 2.0 Migration — Community Update: Development Progress, Timeline, and Path

 — @helloiconworld

IOST

 — @IOST_Official

Kava

  • Kava Swap Testnet: Win $100,000 in the Kava Swap Testnet Competition. July 28th @ 17:00PST — August 4th @ 17:00PST.

 — @kava_labs

Near Protocol

 — @NEARProtocol

 — @NEARWEEK

Orbs

 — @orbs_network

Polygon (previously Matic)

 — @CoinDesk

Secret Network

 — @SecretNetwork

Solana Network

 — @solana

 — @solana

StaFi

 — @StaFi_Protocol

Terra

 — @TerraLUNADaily

THORChain

 — @THORSwap

xDai

xDai Weekly Recap July 16, 2021

  • NFT OmniBridge beta testing is ongoing.
  • Hop.exchange released their multichain bridge connecting xDai, Ethereum and Polygon.
  • Ethereum SANA is a point-to-point storage area node network forked from Swarm and integrated with xDai.
  • Pocket launched their Pocket Portal with xDai support.
  • And more!

 — @xdaichain

0x project

 — @0xProject

1inch

 — @1inch

Upcoming Events

Major upcoming events by CryptoDIffer:

MISC

That’s all for today! Your feedback is highly appreciated! Let us know what you think about the format & content.

Subscribe to Paradigm!

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State of Stake vol. 53 was originally published in Paradigm on Medium, where people are continuing the conversation by highlighting and responding to this story.