Bloomberg’s senior commodity strategist thinks both Bitcoin (BTC) and Ethereum (ETH) are primed to surge in 2022 despite the crypto market’s recent struggles.
In a new analysis, Mike McGlone says both BTC and ETH have solid bases to build on. He predicts they will remain dominant among cryptos in 2022, with Bitcoin moving toward $100,000 and Ethereum breaching $5,000.
McGlone thinks Bitcoin is in a “consolidating bull market” and predicts the US Federal Reserve’s new policies will actually be beneficial for BTC.
Federal Reserve officials have recently indicated they plan to scale back asset purchases and raise interest rates next year in an effort to fight inflation.
Explains the Bloomberg analyst,
“Expectations for Federal Reserve rate hikes in 2022 may support a win-win scenario for Bitcoin vs. the stock market… A reason to take back liquidity is the fact that the S&P 500 is the most extended above its 60-month moving average in over two decades.
Stretched markets have become common, but commodities and Bitcoin appear to be early reversion leaders.
It’s a question of bull-market duration, and we see the benchmark crypto coming out ahead.”
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Michael Sonnenshein, the chief executive of Grayscale Investments, is laying out trends to watch as the crypto market sputters into 2022.
Sonnenshein says in a new letter to investors that he believes the digital economy is still in its early stages.
The CEO thinks it’s important for investors to monitor crypto’s infrastructure development in the new year.
“As the crypto economy and existing financial markets become increasingly intertwined, these are likely to provide some of the most compelling long-term investment opportunities, and Grayscale is laser-focused on identifying and providing seamless, early access to the protocols that are the backbone of this ecosystem.”
Sonnenshein also adds that it has been a challenge sorting through the proliferation of new crypto protocols.
“As we have done since 2013, we will continue to identify the most compelling opportunities and expand our offerings accordingly, both those focused on specific tokens, as well as more diversified and thematic funds.”
The Grayscale executive predicts that Web3 will see “supercharged mainstream exploration and adoption,” throughout this year, which he says presents exciting investment opportunities.
He also believes non-fungible tokens (NFTs) will continue to evolve in 2022.
“We expect to see a blending of the physical and digital worlds even further, particularly around topics, like authenticity, provenance, ownership, and more – and across sectors, including fashion, music, gaming, real estate, and ticketing.
Our team is paying close attention to the evolution of NFTs.”
Sonnenshein concludes that regulators and policymakers are more engaged with crypto right now than ever before.
“This enables the conversation to shift to how these new technologies – when provided with the appropriate regulatory frameworks – can flourish, keeping crypto companies in the United States, and setting a global standard for crypto regulation.”
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After the popularity of DeFi, came the rise of nonfungible tokens (NFTs) and to the surprise of many, NFTs took the spotlight and remain front and center with the highest volume in sales, occuring at the start of January 2022.
Growing number of unique NFT buyers on Ethereum Source: Delphi Digital
While 2021 became the year of NFTs, GameFi applications did surpass DeFi in terms of user popularity. According to data from DappRadar, Bloomberg gathered:
“Nearly 50% of active cryptocurrency wallets connected to decentralized applications in November were for playing games. The percentage of wallets linked to decentralized finance, or DeFi, dapps fell to 45% during the same period, after months of being the leading dapp use case.”
Blockchain, play-to-earn game Axie infinity, skyrocketed and kicked off a gaming craze that is expected to continue all throughout 2022. Crypto pundits and gaming advocates have high expectations for p2e blockchain-based games and there’s bound to be a few sleeping giants that will dominate the sector.
Let’s take a look at five blockchain games that could make waves in 2022.
DeFi Kingdoms
The inspiration for DeFi Kingdoms came from simple beginnings— a passion for investing that lured the developers to blockchain technology. DeFi Kingdoms was born as a visualization of liquidity pool investing where in-game ‘gardens’ represent literal and figurative token pairings and liquidity pool mining.
As shown in the game, investors have a portion of their LP share within a plot filled with blooming plants. By attaching the concept of growth to DeFi protocols within a play-and-earn model, DeFi Kingdoms puts a twist on “playing” a game.
Built on the Harmony Network, DeFi Kingdoms became the first project on the network to ever top the DappRadar charts. This could be attributed to an influx of individuals interested in both DeFi and blockchain games or it could be attributed to its recent in-game, utility token (JEWEL) surging.
JEWEL is a utility token which allows users to purchase NFTs in-game buffs to increase base-level stat, and it is used for liquidity mining that grants users the opportunity to make more JEWEL through staking.
JEWEL/USD daily chart. Source: Gecko Terminal
JEWEL is also a governance token that gives holders a vote in the growth and evolution of the project. In the past four months the token price surged from $1.23 to an all time high of $22.52. At the time of writing JEWEL is down by nearly 16%, trading at $19.51.
Surging approximately 1,487% from its humble start of $1.23 four months ago, back in September, JEWEL token price has increased roughly 165% this last month alone, according to data from CoinGecko.
Guild of Guardians
Guild of Guardians is one of the more anticipated blockchain games in 2022 and it is built on ImmutableX, the first layer-2 solution built on Ethereum that focuses on NFTs. Aiming to provide more access, it will operate as a free to play, mobile RPG game modeling the play-and-earn mechanics.
Guild of Guardians Heroes. Source:Guild of Guardians
Similar to blockchain games like Axie Infinity, Guild of Guardians in-game assets can be exchanged. The project seems to be of interest to many gamers and investors with both its NFT founder sale and token launch generating nearly $10 million in volume.
Launching its in-game token in October of 2021, the Guild of Guardians (GOG) tokens are ERC-20 tokens known as ‘gems’ inside the game. Gems are what power key features in the game such as mint in-game NFTs, interact with the marketplace and are available to earn while playing.
GOG monthly price action. Source: CoinGecko
For the last month, the Guild of Guardians token has performed strongly, reaching an all-time of $2.81. Despite the token being down nearly 50% from it’s all-time high, at the time of writing, some members of the community are looking forward to the possibility of staking and liquidity pools, which are features that tend to help stabilize token prices.
Galaxy Fight Club
Imagine taking a proof-of-picture (pfp) NFT and making it into an avatar to battle other fighters in a galaxy far away? Galaxy Fight Club (GFC) is a blockchain game that switched its gear from a 10,000 avatar collection to the first cross-brand and cross-platform PvP fighting game where players can fight with their collection of avatars.
Focusing on interoperability, GFC uniquely places high value on its original fighters, but allows other avatars to battle for the opportunity to earn rewards.
Artist’s depiction of gameplay in GFC. Source: Galaxy Fight Club Avatar
The game is expected to launch on the Polygon network and it will feature different themes from various partnering collections such as Animetas and CyberKongz, integrating its cross–platform aim. GFC plays on the nostalgia of SuperSmash Bros., except one is battling for loot keys to open loot boxes rather than simply wiping out their opponent.
GFC is currently in beta testing, and is facing minor setbacks, including a delayed IDO. To date, it’s not clear when public access will be made available, but many are hopeful for a Q1 2022 rollout.
GCOIN
Each Galaxy Fighter generates anywhere between 5 to 15 GCOIN daily, and each fighter began generating GCOIN in October of 2021. If a fighter is sold, the new owner will inherit the GCOIN presently accrued. GCOIN is likely to be valuable in the ecosystem because it is needed to power players in game moves, the forging of weapons, opening loot boxes and training and selling second generation fighters.
Despite its minor setbacks, an IDO for GCOIN is scheduled on PolkaStarter for January 6and is set to release 4 million tokens for sale at $0.50 each and a max allocation of $500 per wallet. Sadly, the project’s KYC and whitelist requirements have left many residents sitting out.
According to Ado, a team lead for the project, “The first $1.5M was purchased and sold out in roughly 15 minutes, at which point the remaining $500K reserved only for the Battle Pass holders took another hour to be filled,” indicating a successful IDO. Approximately 2,600 unique wallets are holding GFC fighters, with the top wallet holding nearly 2% of the entire collection.
CryptoBeasts
CryptoBeasts is a pixelated digital art game that elicits the retro feel of the original Zelda game. Built on the Ethereum blockchain CryptoBeasts is a ‘peer-to-peer electronic rare egg system,’ (first for everything, right?) These 10,000 pixelated colorful eggs grant each owner one land parcel in the game’s “Eggland” universe and one DAO vote.
Hatched CryptoBeasts. Source:CryptoBeasts
The DAO operates on a hierarchy where the number of eggs a player owns determines their status and as strange as it sounds, each decision appears to be calculated in CryptoBeasts. Numbers are worth noting as they can determine one’s status, and prime numbered eggs tout benefits like yielding more of its native CBX token and they also hatch rare beasts with increased strength.
According to data from Dune Analytics, the highest-selling rare egg went for 5 Ether, valued at $9,085 at the time of sale. On December 31, 2021 an announcement about in-game tokenomics resulted in an uptick in sales and the current entry point at 0.05 Ether is notably higher than the 0.01 ETH mint price in June 2021.
CBX token
While Cryptobeasts claims it’s more than “play to earn,” but rather “fun-to-play” it is still a blockchain game whose competitive edge is also dependent on its tokenomics. The native token, CBX, is the in-game token that is scheduled to be airdropped to all rare-egg holders.
CBX tokens can allegedly be used and earned in a variety of ways such as beast battling, land parcels generating daily CBX, completing certain in-game tasks and farming and harvesting resources.
CBX can also be staked, incentivizing HODLing a little longer than intended. The token is expected to power in-game utilities and functionalities like purchasing items within the in-game economy to breeding. Similar to Axie Infinity, but not by happenstance, CryptoBeasts intends to integrate an academy and scholarship to provide the opportunity for bigger investors to loan out their assets.
Axie Infinity
Notably, the first blockchain game to execute its play-to-earn model, Axie Infinity has an established, highly developed ecosystem with a strong economic model. Axie Infinity is currently seen as the trojan horse for broader blockchain game adoption.
3D scene of Axies. Source: Axie InfinityLand 3D Teaser
Axie Infinity continues to solidify its place at the top of DappRadar NFT rankings, according to its data. As the top traded collection, Axie Infinity comes on top of NBA TopShot, Splinterlands, and WAX blockchain’s, “Farmer’s World,” closing out $563.6 million in the past 30 days.
SLP, AXS and RON
Axies are the NFT used for gameplay and can be bred using SLP, the in-game utility token, and AXS, which is the governance token. AXS can be staked, and with over $1.68 billion staked, users are continuing to reap a substantial APY despite yield being reduced from over 200% at the start to roughly 86%.
The recent launch of the Katana DEX gives players the opportunity to provide liquidity using SLP or AXS to farm RON.
RON is the ecosystem token and, similar to MATIC, it will be used as the gas fees on Axie Infinity’s Ronin sidechain. Axie Infinity, in many ways, is its own digital nation with a real economy.
Like any first market mover, it faces challenges and its recent price correction could be an attractive entry point for investors who were previously priced out. With land yet to be released, users may have the opportunity to craft and harvest resources that will generate other tokens.
To date, one of the largest digital land sales in the NFT / Metaverse sector came from an Axie Infinity one of 75 genesis land plots that sold for $2.3 million.
Adapting to the rapidly growing blockchain games ecosystem, the Sky Mavis team has announced that it has rewritten the core engine from its 2D art style to 3D. The team also announced that ‘Project K’— codename for a piece of a game and Lunacia’s kingdom— will be released in phases and each focuses on different elements of the game from resource gathering to “group strategic gameplay.”
As the concept of blockchain games gains broader adoption, and “play to earn” and “play and earn” models continue to develop, 2022 will be an exciting year for gamers, creators, and investors alike.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Andreessen Horowitz – a leading venture capital firm and a prominent investor in the cryptocurrency space – has raised a fresh $9 billion to further its involvement in the growing industry.
Andreessen Horowitz (a16z) is amongst the leading venture capital companies investing in all sorts of crypto and tech-related projects.
According to a recent announcement, the firm has raised a fresh $ billion “to invest via our Venture, Growth, and Bio Funds.”
Out of the total number, $1.5 billion will go to the Bio fund, $5 billion to the Growth Fund, and $2.5 billion to the Venture fund.
… coupled with the $2.2B Crypto Fund and $400M Seed Fund we raised in 2021, we will continue to invest across the entire spectrum of stages, writing checks as small as $25,000 and up to hundreds of millions of dollars. – Reads the announcement.
The company has been historically bullish on the advent of cryptocurrencies. Its co-founder, Marc Andreessen, stated last year that Bitcoin is fundamental to the technological transformation.
a16z has been involved in multiple fundings in the industry. Last October, Axie Infinity raised $150 million in a funding round led by the VC firm.
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A popular crypto analyst is offering his opinion on what comes next for Bitcoin (BTC) and decentralized finance protocol Aave (AAVE).
The analyst pseudonymously known as Smart Contracter tells his 199,700 Twitter followers that the native token of the Aave platform has potentially made a higher low, signaling a possible rebound.
The cryptocurrency trader says that AAVE has reached a potential support level by touching the 0.618 Fibonacci retracement level, which is used to identify support or resistance levels.
Smart Contracter says that AAVE touched the level after trending downwards in a corrective three-wave pattern that came after a bullish five-wave pattern.
According to the Elliott Wave Theory, the dominant trend which is represented by the direction of the five-wave pattern continues after the corrective three-wave pattern.
“Dipped into some AAVE here, those green shoots on the weekly chart turned into a nice five-wave rise on the daily chart, now we tapped the 0.618 and I think this is a higher low in the making.”
Source: SmartContracter/Twitter
In the same tweet, Smart Contracter illustrates Aave’s upward-trending five-wave pattern and a smaller downward-trending three-wave pattern. According to the pseudonymous crypto analyst, AAVE could surge upwards against the US dollar and Bitcoin next.
While maintaining that Bitcoin could hit $100,000 in 2022, Smart Contracter says that the flagship cryptocurrency could fall to a low of $37,500.
Bitcoin is trading at $42,450 at the time of writing and reaching the six-figure price would require a price increase of slightly over 135%.
Per Smart Contracter, the bear market could start soon after Bitcoin has reached a price of over $100,000.
“I think BTC bottoms anywhere between now and $37,500 and gives us a similar structure to what we saw in 2019 just on a larger timescale, with a run to $100,000 still on the table for 2022 in my opinion.
After $100,000+ then we get into [the] 2018-style extended bear market territory.”
Source: SmartContracter/Twitter
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This week in coins. Illustration by Mitchell Preffer for Decrypt.
The new year has so far brought only disappointment to crypto investors.
Only one of the top 20 cryptocurrencies by market cap has grown in price over the past seven days. That honor goes toChainlink, which is up 20% at the time of writing, according to CoinMarketCap. All other top coins have posted double-digit percentage losses in the new year.
Market leader Bitcoin has actually had one of the more modest falls this week, comparatively. It’s down 13% over 7 days, trading at around $41,000 at the time of writing. Despite the slump, the Bitcoin network set a new record last Sunday, when its hashrate hitan all-time highof 203.5 exahashes per second (EH/s), before hurtling back down a few days later.
Hashrate is the unit of measurement that describes the total computing power of miners on a blockchain. More computing power means more network security, since more power is then needed to hijack 51% of the network and compromise the values in the distributed ledger.
Bitcoin’s new and brief hashrate record marked a 200% increase in power since July last year, when a state-wide mining crackdown in China sank the network’s hashrate.
Many Chinese miners relocated to Kazakhstan and the network bounced back more powerful than ever, however the civil unrest in Kazakhstan earlier this week prompted authorities toshut down internet servicesacross the country, plunging the network’s hashrate back down to about172 EH/sat the time of writing.
On Tuesday, the United States Securities and Exchange Commissiondelayed giving a verdicton whether to approve or reject a Bitcoin spot ETF application by the New York Digital Investment Group (NYDIG). A new date has been set for March 16 this year. NYDIG’s application joinsproposals by Bitwise and Grayscaleon the SEC’s back burner.
Bitcoin hit another milestone this week. On Wednesday, the market dominance of the world’s number one cryptocurrencyhad sunk to 37.28%. The new figure marks Bitcoin’s lowest level of market dominance since 2018, though it still means that one currency alone corners well over a third of the market.
Also on Wednesday, the U.S. Federal Reserve indicated that it could move its decision to hike interest rates and stop printing money to mid-March. Bitcoinshed 6% of its valueand crypto’s global market cap fell 6% in the 24 hours after the news. Stock prices also fell more than 3%.
Ethereum and altcoins fared little better
While Chainlink is surging, other so-called altcoins are deeply in the red. Ethereum is down 19% from last week and trades at $3,030, despiteNFT sales soaring againto start the new year (most NFTs are built on Ethereum).
This week, the second biggest cryptocurrency was caught in the crosshairs of competitive concerns.
On Wednesday, a team of analysts at investment bank JP Morgan declared that Ethereum could face competitive difficulties from rival blockchains like Avalanche, Solana and Terra in the near future, since all of them are providing more scalable service and lower gas fees than Ethereum. Ethereum’sdevelopers responded, saying the critiques were exaggerated.
That same day, a report by crypto investment firm Electric Capital concluded that Polkadot, Avalanche, Solana, and Terra have all hadfaster initial growththan Ethereum did, in terms of active development, than Ethereum back when it was at a comparable stage in its journey. It’s worth adding the caveat that Ethereum grew in a very different market environment to its rivals.
Funnily enough, Solana, Avalanche and Terra’s LUNA are some of the biggest losers this week, each with seven-day price losses of more than 20%. Solana is down 23% in a week and currently trades at $134.50. Avalanche and LUNA are both down 29% to $80.27 and $63.69, respectively.
It’s been a dismal start to 2022 for crypto, but excitement within crypto about what’s up ahead has not dampened because of it.
Disclaimer
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
The price of bitcoin fell to a three-month low Saturday, continuing a slide that began Wednesday when the Federal Reserve sparked a broad sell-off by cautioning it may move more quickly than previously expected to reverse policy meant to bolster the economy during the pandemic, and experts forecast the latest crypto market drawback is likely to go on for weeks.
Bitcoin fell to a more than three-month low of about $40,600 on Saturday afternoon.
Getty Images
Key Facts
Bitcoin fell as much as 3% to below $41,000 by 1:45 p.m. ET, according to crypto data website CoinMarketCap, bringing its losses to more than 12% since the Fed warned it may move more aggressively to remove pandemic-era stimulus as it looks to combat high levels of inflation.
In a weekend email, analyst Yuya Hasegawa of cryptocurrency broker Bitbank cautioned he expects the world’s largest cryptocurrency could continue falling until the broader market, which has similarly struggled since the Fed’s Wednesday announcement, digests the likelihood of the Fed hiking interest rates as soon as March.
Hasegawa said bitcoin could fall as low as $40,000 in the near term, but that the government’s consumer price index report due out next Wednesday could bring a rebound if it shows inflation spiked more than expected, stoking the inflationary fears that have lifted bitcoin to new highs as recently as November.
On Thursday, crypto billionaire Mike Novogratz, the CEO of financial services firm Galaxy Digital, told CNBC the selloff could push bitcoin down another 8% from current prices to as low as $38,000—a level unseen since early August.
“I’m not nervous in the medium term but we’re going to have a lot of volatility in the next few weeks,” the staunch bitcoin bull said told CNBC, before pointing to booming institutional adoption as a bullish indicator for the nascent space.
Novogratz wasn’t alone among billionaire crypto investors cheering bitcoin on during its latest sell-off: “So. much. money. patiently waiting to [buy the dip] in bitcoin,” Barry Silbert, the founder and CEO of crypto firm Digital Currency Group, wrote on Twitter Saturday afternoon.
Tangent
Bitcoin was far from alone in falling Saturday afternoon. Over the past 24 hours, ether, binance coin and sol were down 5%, 6% and 3%, respectively—pushing losses to roughly 20% apiece over the last week.
Crucial Quote
“Bitcoin remains vulnerable to a breach of the $40,000 level, and it could get bad for ether if it breaks the $3,000 level,” Oanda Senior Market Analyst Ed Moya wrote in a Friday email. Ether prices clocked in at about $3,034 on Saturday. “The long-term outlook is still bullish for both the top two cryptocurrencies, but the short-term is looking ugly.”
Contra
Despite bitcoin’s bouts of intense volatility, Goldman Sachs co-head of global foreign exchange Zach Pandl wrote in a note to clients this week that the cryptocurrency could top $100,000 in the next five years. Pandl said he expects bitcoin’s share of the crypto market, currently about 41%, “will most likely rise over time as a byproduct of broader adoption of digital assets” and that the cryptocurrency will increasingly compete with gold as a hedge against inflation.
Big Number
$1.9 trillion. That’s the value of all the world’s cryptocurrencies Saturday afternoon, down more than $300 billion, or 14%, since Wednesday and more than $1 trillion below an all-time high of $3 trillion in November.
Surprising Fact
Over the last five years, bitcoin prices have skyrocketed about 4,300%.
Further Reading
Major Cryptocurrencies—Including Bitcoin, Ethereum—Plummet After Fed Minutes Signal Looming Interest Rate Hikes (Forbes)
Amidst another red weekend, Bitcoin is facing its most critical support area in the mid-term. So far, despite 2022’s first day, the new year has recorded seven consecutive daily red candles (keeping in mind there are a few more hours until today’s candle close).
Option Market Analysis
By @N_E_D_A
The sharp spike in omicron cases, US Federal Reserve’s announcement about raising interest rates due to a surge in the inflation rate, along with the events in Kazakhstan – are probably the fundamental reasons behind the recent selling pressure in the crypto markets.
Fear is also all around in the options market. Options traders have been hedging their portfolios by selling Calls and buying Puts during the last few days. Last 48-hours Top Instruments open interest change tells on hedging strategies for short-dated expiries.
Technical Analysis
By @GrizzlyBTCLover
Looking at the macro indices, we see that the US10Y index has reached its highest level over the past year. Bitcoin has seen a major price correction whenever this index came at high levels (marked by a red horizontal line on the bottom of the following chart).
Also, the DXY index has not shown any bearish signs so far, which historically correlates negatively with Bitcoin.
BTC faces the key price area of $40-42K on the daily chart, which has played a resistance and support role in the past year.
Breaking down this level will likely lead to the intersection of static and dynamic support at $37K. The Head & Shoulders pattern, a bearish pattern on an uptrend, has convinced many analysts that bitcoin will retest lower levels.
Futures & Spot Marker Analysis
By @CryptoVizArt
Over the last week, the 7-day moving average of Inflow Mean Value (inflowing transactions’ mean size) to Spot Exchanges showed a selling pressure in the spot market while the price action was trying to break above the $53K resistance.
Then, the market plunged towards $41K in the following days. Now, the spot market inflows have cooled down.
The worrying sign could be the high Futures Market’s open interest, primarily attributed to Binance. Even though the market was witnessing significant volatility during the last couple of weeks, the open interest in Binance has not seen any significant drop yet.
Therefore, many analysts are fearful about an immediate shadow to lower levels that will flush the long positions. However, it’s hard to determine if the long positions are the majority, based on the funding rate and some other metrics.
A possible explanation might be that big players are shorting the market to hedge against any potential bearish market. Therefore, a rational strategy for traders might be to lower their risk by staying away from high leveraged positions until the futures market starts to experience a growth in open interest, as we saw between May and July 2021.
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The history of Ethereum transaction fees was the topic of discussion in 2021, with the peak recorded in May 2021. Although the current ETH gas fee has decreased, compared to the peak last year, the fee remains a big issue in the crypto community.
Finding a proper solution to address the issue is always a headache, particularly with Vitalik Buterin, Ether’s co-creator. The co-founder made a couple of proposals last year, highlighting scalability and gas fee improvement.
Buterin Sees the Problem of High Gas
During the month of November 2021, Vitalik Buterin and Ethereum developer Ansgar Dietrichs released a new Ethereum Improvement Proposal (Ethereum Improvement Proposal) dubbed EIP-4488 as a temporary solution to reduce the amount of gas used by Layer 2 scaling solutions on the Ethereum blockchain.
This output aims to reduce the high cost of natural gas while waiting for more powerful options to become available.
Buterin is striving for a better Ethereum network as previously this week, he proposed a new direction, called “Multidimensional EIP-1559.”
So what is EIP-1559 about?
According to details in Ethereum co-founder’s blog post, each different resource within the Ethereum Virtual Machine (EVM) requires different gas consumption.
It is possible to simplify the existing fee structure for Ethereum by calculating different gas costs based on varied resource usage.
Changes are Needed
Currently, Ethereum employs a mechanism in which the same amount of gas is used for a variety of purposes across the network.
To wit,
“The scheme we have today, where all resources are combined together into a single multidimensional resource (‘gas’), does a poor job at handling these differences.”
Using a single resource for both the worst-case scenario and the average-case scenario does not yield the best results. Simply put, users of the Ethereum network are obliged to pay more for an activity on the network when they could be charged less.
The new fee structure will establish a fair framework in which gas fees will be used more efficiently, allowing users to spend less money on a variety of activities such as minting, calldata transactions, and other activities that involve.
Buterin proposed two techniques to introduce multidimensional EIP-1559 in his proposal. Gas prices for resources like Calldata and storage consumption, on the other hand, will be calculated by dividing the basic charge by one resource unit divided by the base fee.
As an alternative, setting a base cost for resource usage at a fixed amount, such as 1 Gwei, would be more challenging.
In this circumstance, unlike the previous, there will be no gas block restriction, but there will be a burst per resource limit.
Priority fees will differ because they will be calculated as a percentage of the basic fee, with block producers receiving a payment equal to the base fee multiplied by the percentage.
The update is expected to provide the network with an additional layer of security as well as a more thorough cost structure.
Any market user has at least once encountered the story of high Ethereum transaction costs. The arrival of “Ethereum Killers” such as BSC, Solana (SOL), Near Protocol (NEAR), and Avalanche is also motivated by ETH transaction fees.
Massive Hike in Gas is Hurting the Network
Transaction fees on Ethereum have risen dramatically in response to demand for two of this year’s hottest crypto frontiers: decentralized finance (DeFi) and non-fungible tokens (NFT).
Clearly, escalating prices are a deterrent to both retail investors and developers attempting to create enterprise-grade apps such as streaming platforms or video games.
Even if the ETH gas fees have gotten more affordable, many projects and users who have abandoned Ethereum in favor of other blockchains have no plans to return for the time being.
The contest between blockchain platforms was becoming increasingly exciting and competitive at the time.
In 2022, the Ethereum blockchain will be upgraded to Ethereum 2.0, which will include capabilities such as moving from energy-intensive PoW consensus to PoS.
The update is expected to reduce transaction fees and speed up processing times, which have negatively impacted on the growth of blockchain applications such as DeFi or NFTs.
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