Blockchain

Why is the Ethereum community looking forward to EIP-1559?

In a previous article, we discussed the changes that will take place after EIP-1559 is implemented on Ethereum and the modification of the current gas fee system. As explained, the main objective

The post Why is the Ethereum community looking forward to EIP-1559? appeared first on AMBCrypto.

Published

2 weeks ago

January 7, 2021

Republished by Plato

In a previous article, we discussed the changes that will take place after EIP-1559 is implemented on Ethereum and the modification of the current gas fee system.

As explained, the main objective of EIP-1559 remains to lower gas fees for its users so that individuals are not overpaying for their transactions to go through. While this might be the major objective, there are other advantages to its application.

Slack Mechanism

In simpler terms, the slack mechanism of EIP-1559 will allow some blocks to be bigger during high congestion periods and other blocks to be smaller during periods with minimal traffic.

Previously, miners had the ability to mine unbounded blocksizes and it led to incentive problems. Now, with EIP-1559, miners will be discouraged to mine larger blocks if users are not paying high because the higher BASEFEE is not allocated to them.

Security enhancement of Ethereum

After issuance becomes low for most blockchains in the future, transaction fees are going to pay for security. This might be extremely risky if the block subsidy is over. Hence, the EIP-1559 model would be removing the network security dependence on transaction fees by incentivizing miners with a more reliable perpetual block subsidy.

A perpetual block subsidy is supposed to be a more stable income for miners, and over the long-term, it will instill better stability and security.

Disadvantages will stem down to miner’s sentiment

Under the EIP-1559 protocol, there is one condition where BASEFEE is zero – If the mined block is below 10M (i.e 10 million) gas. So, when BASEFEE is zero, the tip put forward by the user would entirely go to the miner. Hence, if miners decide to keep the mining below 10M at all times, they will continue to earn the entire fee.

However, it is important to note that a tip auction is only initiated when the demand for block space is more than the available supply.

While it is a legitimate concern and miners could trigger a soft fork if needed, such vector attacks haven’t been seen in the past with any blockchain. Hence, the threat is minimal, but the picture will only be clearer when EIP-1559 goes live.

Ethereum Monetary Policy: Does it change Ether’s value?

Functionality-wise, EIP-1559 has the potential to solve Ether’s transaction fee woes in theory. However, the implementation may also push Ether towards becoming a deflationary-attained asset.

The entire logic is driven by the BASEFEE. As mentioned earlier, the BASEFEE paid by the users will not be allocated to miners because the fee will undergo a burn proposal. Since the BASEFEE will always be burnt, the existing supply of Ether will become more valuable for investors.

However, it does come with certain limitations. To maintain positive miner sentiment, the block reward+tip should always be more than the BASEFEE, otherwise, miners will be underpaid. The burn proposal may also sometimes carry an inflation probability, but the hard cap on inflation is 0.5-2% on Ethereum, so that should be avoided.

Extra note

Considering EIP-1559 is supposed to reduce gas prices, it may not entirely do that. However, it will optimize the transaction fees paid by users and avoid any form of an overpayment which happened during the DeFi surge of 2020.

Keeping an eye on the horizon, the successful execution of EIP-1559 can emerge to be one of the most crucial updates for Ether’s value in the years to come.

Source: https://ambcrypto.com/why-is-the-ethereum-community-looking-forward-to-eip-1559

Related Topics:blockchain DeFi ether Ethereum investors Mining Security The Block The Future

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Blockchain

Aave hits record $288 high as demand for flash loans and staking increases

Published

4 hours ago

January 25, 2021

Republished by Plato

Aave (AAVE) price has been on an absolute tear for weeks and today the DeFi-token rallied to a new all-time high at $288.90.

The decentralized finance protocol is one of the most popular in the market and the recent rally in the DeFi sector is one of the driving forces behind AAVE’s rally.

*AAVE/USDT 4-hour chart. Source:* *TradingView*

At the start of 2021, AAVE price was trading at $83 and the recent rally appears to have bolstered the protocol’s surging total value locked, increasing buy volume on spot and derivatives exchanges and the continued development of Aave’s lending platform and flash loan issuance.

TVL soars to a new high

Data from DeFi Pulse shows that Aave’s TVL rose from $2.03 billion on Jan. 1 and as (BTC) and Ether (ETH) price went parabolic Aave’s TVL also surged.

*Total value locked on AAVE. Source:* *DeFi Pulse*

Currently, Aave’s TVL sits at a new all-time high of $3.75 billion, making the platform the second-largest DeFi platform by TVL behind Maker (MKR).

The steady addition of new tokens to the lending and borrowing protocol increases the likelihood that its TVL will continue to rise and help AAVE retain its standing as one of the top DeFi projects in the cryptocurrency space.

Staking drives demand for AAVE token

AAVE’s trading volume also surged at the beginning of 2021, increasing from $200 million on Jan. 3 to a high of $928 million on Jan. 16.

*AAVE price vs. Reported trading volume. Source:* *TheTIE*

As AAVE price reached a new high, it’s 24-hour trading volume notched a record $1.06 billion. This volume surge is partially driven by investors acquiring more tokens for staking, with 26.8% of the total supply of AAVE currently staked on the platform earning an APY of 6.1%

Flash loans attract investors

Another reason for AAVE’s recent surge is the growth of its flash loans.

Flash loans allow cryptocurrency holders to collatoralize their portfolio to fund other purchases or new crypto purchases. The loans also help investors utilize the value in their tokens without the need to sell see them and create a taxable event.

Since launching flash loans less than 12 months ago, more than $1.7 billion have been issued and it’s expected that this figure will increse as the crypto bull market progresses.

*Total flash loan issuance to date on AAVE. Source:* *Messari*

As can be seen in the chart above, the most dominant token requested for flash loans is the DAI stablecoin, followed by USDC and ETH. Data from Messari shows that Aave issued $25 million in loans in the first half of 2020, $500 million in Q3, and nearly $1 billion in Q4, including $450 million in December.

The expansion of the flash loan concept will likely attract more users to Aave, especially since they can be used for arbitrage opportunities between DEXs, collateral swaps, self-liquidations and a variety of other applications within the DeFi sector.

Source: https://cointelegraph.com/news/aave-hits-record-288-high-as-demand-for-flash-loans-and-staking-increases

Blockchain

Blockchain-based-video-game

Published

4 hours ago

January 25, 2021

Republished by Plato

Ethereum and the broader cryptocurrency market have seen mixed price action over the past few days and weeks. Ethereum Price is Surging Despite the selling pressure it has experienced at $1,200, ETH beat all odds and surged beyond $1,400, recording a new all-time high at $1,423.38. At press time, the…

Source: https://btcmanager.com/Blockchain-based%20video%20game%20community%20and%20development%20platform,%20Enjin%20(ENJ)%20witnesses%20the%20launch%20of%20the%20highly-anticipated%20dark%20sci-fi%20action-adventure%20game,%20Age%20of%20Rust./

Blockchain

Cryptocurrency makes World Economic Forum’s Davos Agenda

Published

6 hours ago

January 24, 2021

Republished by Plato

The World Economic Forum’s upcoming Davos Agenda will feature two separate sessions on cryptocurrency, offering another compelling sign that digital assets have permeated mainstream consciousness.

The sessions, titled Resetting Digital Currencies, will be held on Monday and Thursday. The first session will feature five public speakers, including Bank of England Governor Andrew Bailey and Hikmet Ersek, president and CEO of Western Union.

Thursday’s group features four speakers, including Tharman Shanmugaratnam, a senior minister for the government of Singapore, and Zhu Min, chairman of the Beijing-based National Institute of Financial Research.

“COVID-19 has accelerated the long-term shift from cash,” reads the prospectus for both sessions. “Meanwhile, central bank digital currencies are emerging, potentially transforming how people use money worldwide.”

It continues:

“What policies, practices and partnerships are needed to leverage the opportunities posed by the rise of digital currencies?”

Davos Agenda is a five-day summit featuring some of the world’s leading figures in finance and government. The cryptocurrency series falls under the summit’s “Fairer Economies” theme. Other themes include “Tech for Good,” “How to Save the Planet” and “Healthy Futures.”

The World Economic Forum is devoting more resources to understanding blockchain technology and cryptocurrency. The Geneva-based organization has even created a cryptocurrency working group, which only last month published its inaugural review focusing on the various use cases for digital assets “beyond price and speculation.”

The Forum’s research has cited blockchain technology as a key driver of “sustainable digital finance.” Blockchain and smart contract capability, the Forum’s researchers argue, can unlock “hidden values of legacy digital systems.”

Central bank digital currencies, or CBDCs, are one area of research the Forum has delved into over the past 18 months. In Jan 2020, the Forum announced it had developed a framework to help banks “evaluate, design and potentially deploy CBDC.” The framework was developed in conjunction with over 40 central banks, financial institutions and academic researchers.

Source: https://cointelegraph.com/news/cryptocurrency-makes-world-economic-forum-s-davos-agenda