DeFi

As Ethereum grows, its fees fall. Here’s why it’s a problem – DL News

Published

8 months ago

24 May, 2024

As Ethereum grows, its fees fall. Here's why it's a problem – DL News

Ethereum mainnet usage is not increasing with the price of Ether like before.
Over the past month, the network has created more tokens than it burned thanks to transaction fees.

When Ethereum’s Ether token hit an all-time high of $3,800 in May 2021, the increased on-chain activity caused transaction fees to skyrocket as users piled in.

They have become accustomed to spending over $100 just to trade tokens on-chain. But many didn’t care: there was money to be made.

Fast forward to 2024, and Ethereum is revisiting these heady prices for the first time in over two years. But this time it’s different.

Ether soared to over $3,800 hours after Bloomberg analysts revised the probability of an Ethereum ETF spot approval from 25% to 75%.

Despite the price increase compared to the recent Ethereum Spot ETF Turnaroundtransaction fees on the leading smart contract network remain low – only slightly higher than they were at the height of the 2022 crypto winter.

This is a sign that the demand for transactions on Ethereum is no longer what it used to be.

So, what gives?

Increased transaction efficiency, coupled with an exodus of activity to Ethereum’s lower-cost Layer 2 networks like Base and Arbitrum, have helped moderate demand and make Ethereum cheaper to use.

While this is great for Ethereum users, there are downsides.

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With transaction fees falling on the Ethereum mainnet, the network is failing to burn – crypto speaks for destroy – enough tokens to make the supply of Ether deflationary.

Above all, if fees remain low, this could call into question the network’s economic model.

Ethereum becoming too efficient?

When the Ethereum network destroys more tokens through transaction fees than it rewards validators for processing those transactions, the total supply of Ether decreases and becomes deflationary.

This situation is favorable for the network because it rewards those who help keep the network running without inflating the supply of Ether.

But if users don’t spend enough Ether on transactions, the supply of Ether will swell indefinitely, breaking the network’s business model.

Continued inflation, while unlikely, would devalue Ether and make it less attractive for users to lock into validators to secure the network. After all, it’s better to spend than save an asset that keeps printing units.

So far, ether supply has Shrunk in total since Ethereum reduced the issuance of new Ether with its September 2022 Merge upgrade.

But that is changing. Over the past month, Ethereum’s lack of activity has allowed the network to add over 50,000 Ether, worth $190 million.

If activity and fees spent on Ethereum do not resume, Ether supply will swell by 0.5% – or $2.2 billion – over the coming year.

Where do the fees go?

In recent years, many Ethereum users have moved to so-called layer 2 networks.

Layer 2s like Arbitrum, Optimism, and Base provide Ethereum compatibility, faster transactions, and lower costs, while relying on the Ethereum mainnet for security.

Activity exploded. Since the start of 2024, Layer 2 trading activity and volume have reached unprecedented heights.

These Layer 2s still pay transaction fees on the Ethereum mainnet, but only a fraction of what it would cost if everyone using Layer 2 sent transactions on the Ethereum mainnet.

In addition, the march of Ethereum Dencun upgrade reduce the already low cost of publishing Layer 2 transaction data, thereby further reducing demand on the mainnet.

Elsewhere, developers are improving the cost that governs Ethereum transactions. The result is reduced gas costs, meaning users pay fewer fees for the same types of transactions.

With Ethereum more efficient than ever and a thriving Layer 2 ecosystem, how will the network avoid economic turmoil?

Tim Craig is DL News’ DeFi correspondent based in Edinburgh. Contact us with advice at tim@dlnews.com.

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DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

Discover the exciting opportunities of the Rollblock (RBLK) presale today!

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DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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