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Breaking down Ethereum 2.0 and its sweeping impact on crypto markets, weekly By Christine Kim Research Associate July 14, 2021 Sponsored by ETH Price -2.56% $1,992.17 Market Cap $232.42B Volume (24H) $19.59B (As of 7/13/2021 @ 17:17 UTC. ETH price % change over 24 hours.) If you were forwarded this newsletter and would like to receive it, sign up here.
The new frontier of miner/maximal extractable value (MEV) on Ethereum may have negative consequences for network finality and immutability. Key to defending Ethereum against these MEV forces is the upcoming transition to proof-of-stake (PoS). But will the transition come soon enough?
I’m your host, Christine Kim. Reply to this email any time with your thoughts, comments or queries. And between reads, chat with me on Twitter.
Welcome to another edition of Valid Points.
– Christine
Pulse check Source: CoinDesk Data Dashboard and beaconcha.in ) (As of 7/13/2021 @ 17:27 UTC) If you’re new to Valid Points and the topic of Ethereum 2.0 in general, be sure to check out our 101 explainer on Eth 2.0 metrics to get up to speed about terminology used throughout this newsletter.
Bitcoin (BTC) dominance tends to fall every crypto bull market cycle. As background, BTC dominance is a metric tracking the percentage of total cryptocurrency market capitalization made up by BTC.
Among the alternative cryptocurrencies eating up the market share of BTC, the native cryptocurrency of Ethereum, ether (ETH), is the next largest coin, making up roughly 18% of total crypto market share. While ETH is the second-largest cryptocurrency next to BTC and has been since as early as 2016, it is not the fastest-growing altcoin on the market.
The chiliz token (CHZ) is the exclusive marketplace currency on Socios.com. Socios.com aims at decentralizing fanbase interaction with sports teams by leveraging blockchain infrastructure to facilitate payments for team merchandise, voting rights and other rewards. The marketplace has partnered with over 20 sporting and esports organizations including FC Barcelona, Juventus and Atletico de Madrid.
– Teddy Oosterbaan
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New frontiers Block subsidies, transaction fees and miner/maximal extractable value (MEV): These are the three main revenue streams of Ethereum miners.
Source: Flashbots, Dune Analytics *Missing values for daily extracted MEV appear in this chart as interpolated dotted lines that connects the plot points immediately preceding and succeeding the missing value
The larger MEV rewards become in comparison to block subsidies and transaction fees, the greater the financial incentive for miners to adjust not only the order of transactions but also the order of blocks themselves. In what is known as a “time bandit” attack, miners may begin to identify MEV opportunities in blocks that have already been finalized and reorganize the blockchain in their favor if potential rewards from frontrunning are larger than earnings from honest mining (i.e., block subsidies and transaction fees).
However, it would appear the tools for MEV extraction by way of block reorganization are actively being built and already being executed in primitive forms.
Neither of these two defenses is convincing. The former assumes the collective will of the community is homogeneous and aligned on resisting MEV extraction through block reorgs despite clear evidence to the contrary. For some, such as Aroutiounian, if block reorgs can be done on Ethereum and there is a clear financial incentive for them to happen, they should – regardless of how it impacts public perception of the network.
A message from zkTube zkTube, an Ethereum Layer2 scaling solution that focused on using zero-knowledge proofs to solving the congestion and high gas fees problem, has been combined cutting-edge cryptography and ZK-Rollup to improve throughput and TPS. zkTube is focusing on the development process to complete "cross-rollup". zkTube is the first application to adopts (PLONK) technology into mining functions. It is an environmentally friendly mining mechanism based on decentralized distributed energy management.
A message from CoinDesk The CoinDesk Quarterly Review 2021 Q2 After two consecutive quarters of strong price gains for most of the top crypto assets, Q2 2021 finally brought an end to market euphoria with a resounding crash.
Most CoinDesk 20 assets, which constitute 99% of the crypto market by verifiable volume, ended the quarter with negative returns. Meanwhile, protocol development for the world's largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, reached new milestones.
CoinDesk Research's latest Quarterly Review dives into the trends, developments and technological progress that shaped the crypto markets from April to June 2021.
The full report is now available from the CoinDesk Research Hub.
Validated takes Short-term profitability proves more important for decentralized exchange (DEX) users on Polygon than Ethereum. TAKEAWAY: Polygon’s DEX trading volume and liquidity came and went with a spike in rewards during the month of June, while remaining comparatively more stable on Ethereum over the same time period. (Data, Glassnode)
Sygnum Bank becomes the first banking institution to offer staking services for Ethereum 2.0. TAKEAWAY: The Swiss bank built for digital asset custody, brokerage and tokenization is expanding its offering of yield generating products by offering clients up to 7% per annum on their ETH through staking. In today’s low or negative interest rate environment, the bank wrote in a blog post, digital assets offer an alternative to yield generation. (Article, Yahoo)
Gas prices on Ethereum have been on a downward trend since late April, dropping from roughly 150 gwei to 15 gwei. TAKEAWAY: A higher block capacity, the rising popularity of layer 2 scaling solutions and increased use of alternative payment channels between DEX traders and miners are all likely factors contributing to lower gas prices on Ethereum. (Newsletter issue, Coin Metrics)
Circle, the co-creator of dollar-backed stablecoin USDC, is set to go public at a $4.5 billion valuation. TAKEAWAY: USDC is the second-largest stablecoin on Ethereum by circulating supply next to tether (USDT). In a presentation on Circle’s plans to go public, the company predicted sevenfold growth in USDC’s market capitalization by 2023. The predicted circulating supply would be $190 billion, much higher than leading stablecoin, USDT, which currently is sitting around $63 billion. (Article, CoinDesk)
Weekly volumes in dollar markets for BTC and ETH reached new all-time highs in 2021 Q2. Notably, notional volumes in ether-dollar pairs consistently surpassed bitcoin pairs for the first time ever in the month of May. TAKEAWAY: Surging interest in NFTs and DeFi since the beginning of this year are likely factors contributing to the growth of ether trading volumes. (Report, CoinDesk)
– Teddy Oosterbaan
Factoid of the week
A message from CoinDesk Research The Investor’s Perspective on the Bitcoin Taproot Upgrade Taproot is a bundle of three upgrades to Bitcoin aimed at improving network security, privacy and scalability. At the same time, it poses some potential drawbacks to Bitcoin including risks of low adoption, unintended privacy shortcomings and Bitcoin community disappointment and fracturing.
CoinDesk Research's newest report dives into the economic impact and investment implications of the Taproot upgrade.
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Valid Points incorporates information and data directly from CoinDesk’s own Eth 2.0 validator node in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.
You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.
Search for it on any Eth 2.0 block explorer site!
I'll be extending today's conversation on Ethereum 2.0 with Consensys’ Ben Edgington in a CoinDesk podcast series called “Mapping Out Eth 2.0.” New episodes air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.
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