Ethereum Update: ETH Price Action, EIP-1559, DEXs and Layer 2 Solutions, NFTs

This article provides an update (as of 09:00 UTC on March 7) on some of the currently most popular topics in the Ethereum community.

Ethereum Price Action

Data from TradingView tells us that, on crypto exchange Bitstamp, the Ethereum price reached $1696.25 at 08:07 UTC.

In a video published on YouTube earlier today, crypto analyst Lark Davis said that Ethereum is breaking out ofan “inverse head and shoulders” pattern, which suggest that in coming days we could see Ethereum “blasting” toward the $2000 level (the current all-time high on Bitstamp is $2040.62, which was reached on February 20).

What Davis would like to see is a close above $1715. He would also like to see higher volumes during the current rally. However, overall, Davis says that the charts on Ethereum are looking “very bullish” right now.

https://youtube.com/watch?v=e8uDblpcEus%3Ffeature%3Doembed

The Ethereum price is up 6.66% in the past 24-hour period and up 130.12% in the year-to-date period.

Angel investor Qiao Wang, a former Director of Products at Messari, said last Thursday (March 4) that ETH is “the most under-owned liquid asset in crypto right now.”

Ethereum Transaction Fee Reduction

EIP-1559 is a fee market change for the current ETH 1.0 blockchain. More specifically, it introduces a transaction pricing mechanism that “includes fixed-per-block network fee that is burned and dynamically expands/contracts block sizes to deal with transient congestion.” This enhancement was proposed on 13 April 2019 by Vitalik Buterin (@vbuterin), Eric Conner (@econoar), Rick Dudley (@AFDudley), Matthew Slipper (@mslipper), Ian Norden (@i-norden), and Abdelhamid Bakhta (@abdelhamidbakhta).

The following is a summary of how it is designed to work:

“There is a base fee per gas in protocol, which can move up or down each block according to a formula which is a function of gas used in parent block and gas target (formerly known as gas limit) of parent block. The algorithm results in the base fee per gas increasing when blocks are above the gas target, and decreasing when blocks are below the gas target. The base fee per gas is burned.

“Transactions specify the maximum fee per gas they are willing to give to miners to incentivize them to include their transaction (aka: inclusion fee). Transactions also specify the maximum fee per gas they are willing to pay total (aka: max fee), which covers both the inclusion fee and the block’s network fee per gas (aka: base fee).

“The transaction will always pay the base fee per gas of the block it was included in, and they will pay the inclusion fee per gas set in the transaction, as long as the combined amount of the two fees doesn’t exceed the transaction’s maximum fee per gas.“

On Friday (March 5), at an All Core Devs meeting (ACD 107), it was decided to deploy EIP-1559, which is one of the most controversial changes to Ethereum, as part of the London network upgrade, which is planned to go live in July even if not all Ethereum miners and mining pools are happy with it.

According to The Block’s Data Dashboard, data From Coin Metrics showed that Ethereum’s monthly mining revenue reached a total of $1.73 billion, with $722.78 million of that coming from transaction fees.

Davis says that Ethereum miners are worried that once EIP-1559 has been implemented, their revenue from transaction fees will be cut in half (which mean that their total revenue would go. down by around 25%) and that is why currently 60% of miners are against this proposed change to Etheruem.

According to a report by Coindesk published on March 5, here is where Ethereum mining pools stand on EIP-1559:

“Minority mining pool Flexpool launched a marketing campaign against the EIP. Several minority pools joined, followed by majority pools Ethermine and SparkPool. Over 60% of the Ethereum network’s hash power is now against the proposal. F2Pool is the largest pool in favor of the EIP, with some 10% hash power.“

Coindesk’s report also mentioned that during Friday’s All Core Devs meeting it was decided to pair EIP-1559 with a delay to “Ice Age” (an algorithm designed to increase the difficulty of mining Ethereum over time). The report went on to say:

“Mining pools have only a few options to stop EIP 1559 now that it’s included, and most of these would be considered actively hostile against the network. The largest danger would be a 51% attack against Ethereum, which would censor transactions using the EIPs framework. It remains unlikely, however, given various financial incentives not to attack the network.

“For example, successfully using a 51% attack against Ethereum would likely decrease the value of ether in the short term… Moreover, a new revenue replacement is quickly becoming available for mining networks. Called miner extracted value (MEV), miners can take advantage of their place as arbiters in how blocks are packaged to ‘front-run’ profitable trades… Many Ethereum mining pools are currently implementing MEV software to gather this untapped source of revenue.“

Ethereum-Powered DEXs Moving Toward Layer 2 Scaling Solutions

Last Tuesday (March 3), Joseph Delong, the CTO of SushiSwap, which is one of the most popular decentralized exchanges (DEXs) running on Ethereum, announced that SushiSwap had deployed contracts on Fantom, Polygon (formerly known as Matic Network), xDai, Binance Smart Chain, and Moonbeam Network.

He went on to say that his team planned to also use Optimistic Ethereum Network when it becomes available:

As for Uniswap V3, which is expected to launch this year, it will also need to adopt some kind of Ethereum Layer 2 scaling solution, and there are rumors that it will deploy on Optimism‘s Optimistic Ethereum (which uses Optimistic Rollups).

As for Synthetix, as its founder Kain Warwick explained in a blog post published on January 14, it is planning to “gracefully transition from L1 to a protocol running on both L1 and L2 simultaneously,” and the Layer 2 solution they are going to be using is Optimistic Ethereum, which had its mainnet “soft launch” in January.

Bitcoin Maximalist Jack Dorsey Using Ethereum to Sell an NFT

On Saturday (March 6), Jack Dorsey, the CEO of both Twitter and Square, pointed out that he is selling his first ever tweet as a non-fungible token (NFT) on Ethereum-powered marketplace Valuables.

The tweet that Bitcoin maximalist Dorsey wants to sell with the help of the Ethereum network was posted on 21 March 2006:

Valuables is a platfom that allows any Twitter user to sell a digitally signed copy of any of their tweets. Its FAQ guide explains what it means to own a tweet:

“The tweet itself will continue to live on Twitter. What you are purchasing is a digital certificate of the tweet, unique because it has been signed and verified by the creator.

“This autographed digital certificate will only be issued once on Valuables. It is signed using cryptography, and includes metadata of the original tweet like: when the tweet was posted, what the text contents are of the tweet, the timestamp of the tweet, and the digital signature from the creator’s crypto wallet address.“

This guide also explains why someone might want to pay to own another person’s tweet:

“Owning any digital content can be a financial investment, hold sentimental value, and create a relationship between collector and creator. Like an autograph on a baseball card, the NFT itself is the creator’s autograph on the content, making it scarce, unique, and valuable.“

Yesterday, TRON Co-Founder and CEO Justin Sun said on Twitter that he was willing to pay $2 million dollar for Dorsey’s first tweet.

At the current time (10:11 UTC on March 7), the highest bid for Dorsey’s tweet on Valuables is $2.5 million:

Featured Image by “elifxlite” via Pixabay.com

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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