We’ve given you a lot of charts recently. Let’s not lose sight of the fundamentals. Today we take a fundamental look at:
$ETH after the EIP 1559 upgrade
$ADA in light of the new smart contract functionality scheduled for 12th September!
$LUNA and events in the Terra ecosystem
🎧 Finally, we share a very special podcast release. Tune into Building a Self Sustaining Business with Harjyot Singh.
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Here’s 5 things you need to know about the crypto markets today:
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
🔥 It’s Getting Hot In Ether
A few weeks ago, we reviewed the long awaited EIP-1559 and the concept of Ultra Sound Money. The proposal which was indeed part of the London Hard Fork officially launched on the mainnet activation at block 12,965,000 on 5 August. EIP-1559 specifically changed Ethereum’s fee structure from a traditional auction mechanism to one in which users pay a predetermined base fee. Why did this generate so much hype? Under EIP-1559 the base fee is ultimately burned, meaning that the specific amount of Ether is then removed from circulating supply. Many have speculated that this will lead Ethereum to become deflationary over time as the amount of Ether burned will be greater than that issued annually. Let’s look at how things are going one week after the launch of the upgrade.
In the first eight hours of EIP-1559, 2,458 ETH (≈7M) had been burned.
During this period of time, ETH indeed became deflationary for around one hour when the gas fees were being burnt faster than the rewards being mined.
At the time of writing, 36,751.4 ETH ((≈118M) has been burned at a rate of 3.31 ETH ((≈10.6M) per minute. If you’d like to track these numbers in real time, you can do so here! This still begs the question, is the rate of burn enough to outpace that of issuance and lead ETH towards deflation?
Let’s look in the past before we look forward. As we can see from this chart, approximately 3M ETH has been issued in 2021 thus far. If we annualized this number, ETH supply would grow by about 3.5% YOY. Assuming EIP-1559 were active during this time, the net inflation rate would have still been positive as the total amount of ETH issued would outpace the fees burned. Thus, it does not seem that EIP-1559 ALONE leads ETH towards becoming deflationary. There is, however, a silver lining: When EIP-1559 is combined with Ethereum’s move from Proof of Work to Proof of Stake.
Proof of Stake requires less issuance to secure the network. You can see on this chart that given the current ETH supply and the effect of the move to Proof of Stake, there is a high probability that ETH becomes deflationary with a net inflation rate of 1.15% on the high end to -1.05% on the low end. Of course these are all estimates and rely on the actual burn rates and issuance to come to exact numbers, but one thing remains clear: ETH has a clear pathway towards deflation.
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👏 Cardano, Alonzo & Goguen
With Ethereum’s EIP 1559 upgrade last week, it has been easy for other project advancements to be overlooked. Cardano (ADA) will see the announcement of its Alonzo hard fork deployment date today. Founder Charles Hoskinson announced Tuesday via Twitter that the release date of the upgrade will be revealed Friday. Hoskinson was a member of the Ethereum founding team with industry powerhouses like Vitalik Buterin in 2013, but parted ways with the Ethereum project the following year.
The Alonzo hard fork will introduce smart contracts to Cardano; one of the most anticipated features of the platform. This will open doors to areas such as government programs, insurance and voting.
Cardano was built on the Ouroboros protocol in 2015 as one of the first proof-of-stake protocols proven to be secure. The addition of smart contracts is the focus of the third of five stages, Goguen, in the development roadmap.
Currently, Cardano’s main applications are in identity management and traceability, with prospects of providing easily accessible banking services worldwide. Some have high hopes for the near future in the coming aftermath of the smart contract launch.
The price of ADA rose over 20% from Tuesday into Wednesday following the announcement. The impact of the addition of smart contracts to the Cardano platform cannot be understated. The community surrounding Cardano is very passionate and has vehemently voiced their frustrations about delays in the project throughout the development process. This advancement is the latest and largest against a backdrop of fundamental progress made in previous months.
Regardless of your opinion on Cardano, time spent researching projects can strengthen your convictions and make you a better investor or trader. Always remember cryptocurrency is much more than just speculation.
🎧 Building a Self Sustaining Business with Harjyot Singh
Harjyot Singh is a successful entrepreneur, currently acting as technology and crypto director of Human Protocol.
🌍 Terra Takes Over
Terra is a decentralized blockchain platform courtesy of Terraform Labs. It is supported by 15 e-commerce companies from Korea and Southeast Asia, forming the Terra Alliance. Terra offers many algorithmic stablecoins pegged to different currencies, but UST is pegged to the US Dollar.
LUNA is the foundational asset of the entire protocol and has an elastic supply; as demand increases for the stablecoins LUNA must be burnt to mint them and vice versa. Below you will find just a few of the big things happening in the Terra ecosystem this week:
UST gets listed on Coinbase.
Travala.com (a leading blockchain-based travel booking platform) begins accepting UST for payment.
Coinbase announces it will be listing wrapped LUNA.
bETH goes live on Anchor protocol.
Wormhole Bridge V2 goes live, connecting Terra, ETH, Solana, & BSC.
Terra announces a new launchpad, StarTerra.
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