Ethereum London Upgrade with EIP 1559 Activates, About 300 ETH Burned in Just an Hour

The much anticipated London hard fork with EIP 1559 has been activated at block 12,965,000.

As of writing, 304.9 ETH has already been burned.

While the burning started fast, it may not continue at this rate as all the miners haven’t started mining 30 million blocks yet, so we are not at maximum capacity. Additionally, “once the mempool has been cleared entirely… blocks will become smaller, and basefee will fall again,” noted researcher Hasu.

All the transactions will now be handled according to the new format, which means miners have to burn ETH to include the transactions in a block.

In case wallets aren’t ready for EIP 1559, while the format of the old transactions will stay compatible, the gas price will be converted to the new format — max basefee + tip user is willing to pay. So, as a user, you have to be careful not to overpay.

In response to the hard fork upgrade, Binance announced a temporary pause, for about two hours, on deposits and withdrawals of Ether if the hard fork might result in an additional token to reduce the trading risks brought about by price volatility.

Just as the activation happened, the price of ETH took a drop to $2,513 only to recover fast and above $2,600.

The excitement around the upgrade intensified in the last few days that Ether printed 13 daily green candles in a row. The subsequent red candle only ended up pushing the crypto asset to near $2,800 on Wednesday.

As of writing, ETH/USD aims to go even higher while being down about 40% from its mid-May peak.

ETH/BTC meanwhile has found resistance at 0.069. Once past this, it can rally between 0.073 and 0.077. ETHBTC peaked out at 0.082 on May 15.

According to an Ether enthusiast who goes by CroissantEth on Twitter, just as EIP 1559 goes into effect, it will have an “instant shock to ETH” that could potentially burn “already existing tokens on the network.”

EIP 1559’s shock to Ether supply combined with the ETH locked in ETH 2.0, the record 23% of ETH supply locked in smart contracts, and the declining supply on cryptocurrency exchanges has CroissantEth very bullish on the second-largest cryptocurrency.

Meanwhile, based on the past price performance of Ether around the network upgrades, crypto economist Ben Lilly expects an average return of 5.1% in the 30 days following the upgrade and then 28.8% in 60 days and 64.4% in 90 days.

Such returns could potentially see Ether’s price back at its all-time high above $4,000.

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Author: AnTy

Big Institutions Are Buying ETH for the First Time, Over 25% of Supply Used in Smart Contracts

Ahead of the London upgrade with EIP 1559 that will burn ETH and deplete Ether supply, as supply on exchanges continues to decline.

Trading above $2,300, Ether’s year-to-date gains are back above 200%, but the cryptocurrency is still down about 50% from its all-time high around $4,380 hit three months back.

Interestingly, Ether was traded more than Bitcoin in the first half of the year as the trading volume of the former grew faster than the latter, according to a report from Coinbase. BTC 1.71% Bitcoin / USD BTCUSD $ 40,007.16
Volume 38.54 b Change $684.12 Open $40,007.16 Circulating 18.77 m Market Cap 750.92 b
9 h A Shift in Momentum: Binance Yields to Regulatory Pressure, the Definition of HQ Changing for CZ Too 10 h US Lawmakers See All the “Flashing Warning Signs” of Cryptocurrency Putting USD at Risk 10 h Big Institutions Are Buying ETH for the First Time, Over 25% of Supply Already Used in Smart Contracts

Based on data from 20 major cryptocurrency exchanges worldwide, Coinbase found that the trading volume for Bitcoin for H1 reached $2.1 trillion, up 489% from $356 billion over the first half of last year.

In the same period, Ether’s total trading volume climbed to $1.4 trillion, up 1,461% from $92 billion in the first half of 2020.

According to Coinbase, the largest exchange in the US, this was the first sustained period of time ever that Ether’s trading pace exceeded that of Bitcoin.

Coinbase further noted that many of its largest institutional clients, including hedge funds, endowments, and corporates, increased or bought ETH for the first time during this period, believing the asset has long-term staying power tantamount to BTC’s.

Depleting Supply

Amidst this growing adoption, the most anticipated upgrade, the London hard fork with EIP-1559, is coming in about a week at block 12,965,000.

EIP-1559 is already implemented on the testnet, and its deployment on the mainnet will mean Ether will officially effectively become a deflationary asset as, according to this proposal, the base fee paid on Ethereum Network in ETH will be burned, decreasing Ether’s supply and boosting Ether’s price.

But already, ETH’s liquid supply continues to deplete.

Before even the supply of ETH paid in base fees could be burned, one-fourth of it is now used in smart contracts in terms of DeFi and staked at ETH 2.0, for instance. While the ETH locked in smart contracts is on an incline at over 25%, up from about 12% a year back, the supply held on exchanges that could be easily sold, is in decline at under 13.4%.

Ethereum blockchain is actually the biggest fees earner by a wide margin, which captured over $11 million in fees in the past 24 hours, followed by $3.1 million by BSC, while Bitcoin is recording under $634k.

In the last 365 days, Ethereum has generated $4.3 billion in total revenue compared to Bitcoin’s $1.1 billion at the second spot, as per Token Terminal.

On the third spot is the popular DEX Uniswap at $937.4 million, while its biggest competitor SushiSwap is at the fifth spot with $309.4 million, with BSC in between at almost $327 million.

Interestingly, as CryptoCobain explained in his recent episode of the UpOnly podcast, Ethereum generates more fees during bull runs as everyone is participating in the frenzy, clogging the network and pushing the fees skywards, which after EIP 1559 will means, more fees being burned, leading to even higher prices.

But during downtrends, as we saw recently, gas fees fall in single digits, which doesn’t help prop up its price at all.

ETH basically gets insanely bullish in bull markets and then crazy bearish in bear markets which makes it the best bet during uptrends to increase your wealth but not so much to protect your investment in downtrends.

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Author: AnTy

Bitcoin Shorts Get Annihilated, OI Drops by 50k BTC from Last Week

While Bybit Bitcoin’s futures had the biggest drop of 15.59% in OI, followed by Binance’s 12% in the past 24 hours, Bitfinex, FTX, and CME had the biggest increase of 12.81%, 11.54%, and 11.86%, respectively.

Bitcoin price surged to nearly $40,000 in a strong upwards move, late on Sunday or early Monday. This represents a nearly 36% jump in price since the $29,300 low last Tuesday.

While several factors like Alameda Research putting in a bottom by “buying a LOT” at the lows, Tesla CEO Elon Musk announced his bullishness for crypto, and speculation over Amazon’s potential involvement in the cryptocurrency sector contributed to this bullish strength, shorts have a significant part to play in this.

As we have been reporting for the past month, the funding rates on the perpetual contracts have been staying in the negative, with the market extremely short on BTC. At the same time, open interest continued to climb sharply.

And finally, an epic short squeeze happened.

In the past 24 hours, 102,558 traders have been liquidated for $1.14 billion, with nearly $945 million of it belonging to shorts, as per Bybt.

The figure is expected to be much higher given that Binance had stopped showing its real liquidation numbers and is currently accounting for less than 20% of all liquidations when it used to be about half, much like Bybit.

“Bitcoin shorts just got blown out. Quarterly basis popped from 5% to >10% briefly,” noted trader and economist Alex Kruger.

Amidst this, Binance and FTX have reduced their leverage offering from more than 100x previously to now only up to 20x. Andrew Kang, Mechanism Capital, said,

“Usually, big short squeezes like we saw on BTC today bleed out, but this continued upward momentum is pretty indicative of shorts/stables being price-insensitive buyers trying to scoop any liquidity they can.”

The result of this short squeeze can also be seen in open interest. Total OI on Bitcoin futures has crashed by 50k BTC — currently at 349.7k BTC from over 400k BTC less than a week back.

In the past 24 hours, OI on Bybit Bitcoin’s futures had the most significant drop of 15.59%, followed by Binance’s 12%, which leads the futures space. OI on Binance is now at 79.1k BTC, down from 101.37k BTC on June 20, which increased 78% in nearly a month as new short positions were opened.

Meanwhile, Bitfinex, FTX, and CME had the most significant increase of 12.81%, 11.54%, and 11.86%, respectively, as of writing.

In the case of Ether, Binance is the only with a decrease, of only about 3.67%, though, in OI. Total Ether OI is now 2.54 million ETH, down from 2.94 million ETH in less than a week. SplitCapital said,

“Make no mistake, the real pain won’t come from shorts rather the absurd amount of people that are parked all in stablecoins. They won’t chase till 40k breaks.”

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Author: AnTy

EIP-1559 Delivers What it Promises, But it’s Not Solving Gas Fees Problem

Highly anticipated EIP 1559 is getting closer and closer to its implementation as each day passes. While London hard fork upgrade in mid-July is still a month and a half away, it is all the Ethereum community can talk about.

The reason for EIP-1559’s popularity is the new narrative it gives to Ethereum – an “ultrasound money,” according to ETH enthusiasts.

This Ethereum Investment Proposal will basically burn a portion of the fees that are paid in ETH hence removing those ETH from circulation. Given that the Ethereum network is the biggest fee earner in the crypto space, currently generating over $9 million a day, the pace at which the gas will be burned will effectively be faster than at which ETH is mined.

This will reportedly make Ether a deflationary asset, hence, sending the prices higher. However, if you were expecting this proposal to bring down the extremely high fees on the network, then you won’t be getting a reprieve.

EIP 1559 is not about solving the gas problems and tip aka priority fee estimation is as complex as gas price estimation today which Georgios Konstantopoulos, a researcher at Paradigm, noted is true as it fundamentally, still follows the first-price auction.

Instead of relying on oracles for the correct price, “under 1559, basefee is an *objective* measure of congestion, which catches up quickly to the true equilibrium price, bursting bubbles sooner, which means bidding wars are necessarily short-lived,” said Barnabé Monnot, a researcher at Ethereum Foundation.

Meanwhile, James Hancock, project team lead at EthSignals explained that EIP-1559 basically reduces the overpaying transaction fees, which is different than simply reducing fees. He added,

“Inefficiently priced transactions mean you pay more than you should (based on market demand). We shouldn’t pay more than we should.”

While some don’t believe that the upgrade delivers, Konstantopoulos, along with researcher Hasu in their detailed write-up on derivatives platform Deribit, said it “largely holds what it promises.”

“It should make fee estimation much more predictable except for very short periods of high congestion…Its ability to set minimum fees in the protocol opens a new design space, ranging from elastic blocksize, perpetual block subsidy, better resistance against economic abstraction, to better auction models going forward.”

ETH is doing what MakerDAO did

Source: @Tetranode

Amidst all this, during the latest Ethereum core developers meeting, MH Swende identified an issue in EIP 1559 where, as Tim Beiko, who coordinates the developer work on the second-largest network for the Ethereum Foundation shared on Twitter, “the new fields introduced in transactions (maxFee & maxPriorityFee) did not have an explicit cap.”

This meant that an attacker could create arbitrarily large transactions which prior to this EIP wasn’t possible, to create a transaction with a huge gas price as one actually needed to have that amount of ETH and if the transaction is included, the amount has to be paid. He said,

“Because the fields in 1559 are maximums, you could abuse this, not actually pay those huge gas values, and spam the network.”

However, the fix is simple which includes adding four checks to EIP-1559: the first two check that the maxFee and maxPriorityFee are < 2^256, the third checks that the maxFee is larger or equal than the maxPriorityFee, and lastly, it is checked that a transaction sender’s balance is larger than their maxFee times their gas used.

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Author: AnTy

Maximum Issuance Of Ethereum to Drop 50% After the ETH 2.0 Launch: Vitalik Buterin

  • Ethereum monetary policies i.e. the minimum necessary issuance (MNI) troubles raises the need for the EIP 1559 proposal.
  • Ethereum 2.0 sets sights on reducing the issuance rate to under 2 million ETH, Vitalik Buterin says.
  • Minimum staking requirements for the ‘Phase 0 launch’ set to boost ETH prices.

Ethereum’s varying inflation rates due to Minimum Necessary Issuance (MNI), raising questions from the community as ETH 2.0 Phase 0 heads into launch. The second-largest blockchain employs a different rewarding structure from Bitcoin’s fixed supply rate; determining the minimum issuance rate as its difficulty bomb adjusts.

While the MNI ensures security on the network, several questions regarding the objectivity in determining the minimum rate and long term survival of the blockchain without continual forking have been raised.

In a recent podcast, Ethereum’s co-founder, Vitalik Buterin, answered these questions on the MNI, stating the mechanism ensures issuance and price of ETH remain at a “reasonable cost” in the long term. He said,

“In the longer term, a minimal viable issuance is an explanation for why the parameters like issuance are set up – it seems empirical that these parameters can motivate particular amounts of Ether to be sticking at a reasonable cost.”

ETH 2.0: Inflation set to Drop by 50%

Vitalik believes that the solution to high inflation will be quickly solved with the launch of Ethereum 2.0 Phase 0, expected in less than two months. In the podcast, Vitalik explained that the new proof-of-stake (PoS) mechanism will lower the inflation rate by over 50% despite the MNI remaining variable.

“One of the reasons why we’re doing Proof of Stake is because we want to greatly reduce the issuance. So in the specs for ETH 2.0 I think we have put out a calculation that the theoretical maximum issuance would be something like 2 million a year if literally everyone participates.”

Furthermore, Vitalik claims there is a good chance that the staking process will lower the inflation rate to only 1 million ETH tokens per year.

ETH Steady Rise to Continue Following PoS Launch?

Ether’s price skyrocketed past $200 last week as potential stakers filled their bags to reach the 32 ETH minimum limit needed to stake on the blockchain. Stakers will earn around 4-5% returns on their investments per year to keep transactions safe on the blockchain.

Adam Cochran, a partner at MetaCartel Ventures, said the ETH supply may see a huge reduction following the staking and buying frenzy. He estimated that 10 to 30 million Ether could be taken off the open market and with the supply rate dipping 50% following the launch of ETH 2.0, ETH price may appreciate significantly.

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Author: Lujan Odera