Home / Technology / Researchers fear that Ethereum’s new economic model is unrealizable Researchers fear that Ethereum’s new economic model is unrealizable Google +
A monumental shift is planned for the second largest cryptocurrency by market capitalization. Ethereum is approaching its new consensus algorithm, which promises to address platform scalability and transaction throughput bottlenecks – however, a recent industry report claims that this may not work.
Ethereum ETH is currently similar to Bitcoin Network, simply providing its computing power to ensure that transactions are legitimate (proof-of-work).
Developers will reward the way in which the network selects those who consider the blockchain trustworthy and secure. Instead, they can use the weight of their balances to vote on passing or denying transactions (Proof-of -Stake). If examiners try to play the system by dishonest behavior, they will lose all their chips as a punishment.
This is considered more energy-efficient than Bitcoin’s proof-of-work, and advocates of this consensus style are considering this more “egalitarian.
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With this in mind, Delphi Digital, a boutique digital asset research firm, has pulled out Ethereum’s proposal with some extensive research. It was shared directly with Hard Fork, so let’s look for the main takeaways. There is no more symbolic sales to generate profits
The success of the new Ethereum means that the owners are properly motivated to lock their owners’ cryptocurrency, whose value is essentially as significant for the validation of transactons is used. This process is called staking out.
But getting crypto-currency fans to “store” their digital value to keep the network healthy is just a small part of the picture.
First coin deals (ICOs) are one thing, because startups with Ethereum-based tokens have to keep themselves. As makers of tokens, these companies typically provide a substantial percentage of sales to private investors via crypto currency exchanges.
There is also a whole ecosystem of start-up companies using platforms that use cryptocurrency as a key component. To survive the bear market, the companies behind these products have sold their own digital assets to pay for the upkeep of development ̵ 1; and that has not always worked.
In 2019, the sale of gift certificates is quite passable é . Delphi Digital researchers noted that the number of new brand sales had plummeted in the second half of 2018, saying that their disappearance has led to a substantial purchase pressure in Ethereum’s markets.
There are significantly fewer Ethereum-based ICOs, and private investors have less incentive to buy ethers, as participating in ICOs is indeed a primary use case for the cryptocurrency.
This effect was reinforced by existing projects that sold the called ethereum to finance their development efforts, which the Delphi researchers refer to as an important factor in the general decline in prices. Courtesy of Delphi Digital / Glassnode
Delphi analyzed 54 of the largest token sales in ICO history (from 2016 to now), strict use of data that could be verified in the chain.
It turned out that a total of 16.25 million ETHs were raised, of which 9.66 million ETHs had already been sucked off the standard cryptocurrency exchange
At the present value, that is 1.3 billion dollars, but up the culmination of the cryptocurrency market – $ 9.
66 million was worth over $ 13 billion.
“We have also isolated the amount of ETH that was eventually sent to a bank to exchange addresses, as it is assumed that the ETH Zurich, which was sent to the stock exchange, was liquidated,” wrote Delphi. “We estimated the amount of ETH that was sent to a stock exchange.
For example, if a project sent ETH from its treasury to an adviser who then sent it to a friend who then sent it for an exchange, this would represent three “hops” […]. Most transfers to an exchange take place at four to five jumps. Therefore, we thought that eight were sufficient for this exercise. Courtesy of Delphi Digital / Glassnode
Researchers Emphasized That There Was Really a Turning Point The number of Ethereum shares traded on stock exchanges clearly overshadowed the gains from brand sales until June 2018. During this time, an epic 76-percent price decline of the ETH began. Ethereum Ecosystem Must Reward Participants [19659008] There is further market pressure that could suppress the price of Ethereum. Firstly, it is necessary to perform software updates to make the proof-of-stake transition smooth and secure.
These are called forks and are available in two types: soft and hard.
In general, forks lead to market sales. The largest drop in prices came after the “Homestead” fork in March 2016, when the price of ETH fell in mid-April by more than 35 percent from 12.50 to 8 US dollars.
“Last week’s Byzantium’s most recent hard-fork resulted in a significantly lower 30-day loss (less than 1 percent) due to the decrease in block premiums (5 ETH to 3) and the hysteria surrounding crypto assets in the US fourth quarter of 2017, “says Delphi.
On average The ETH drops about 8 percent in the week after hard forks. With the latest upgrade, Constantinople, after Fork, ETH’s performance could be pretty well at its historic average, dropping 6 percent.
It has recovered to a similar level until just before the crotch.
Delphi Digital also expressed concerns about the feasibility of the current Ethereum Roadmap, particularly regarding the rewards for participation in the network is structured.
“One of our biggest problems for Ethereum’s long-term viability is net income for validators. Using the currently proposed model, we assume that validator revenue, after taking into account stakeout costs, is too low to achieve mass attractiveness, “said Delphi. “Annual returns on ETH and below 3-4% may discourage those who are able to hedge the network, given the risk-return trading of other investment opportunities.””Proposing that ethereum owners join the network is a one-way transaction.
This means that once the user has deposited his tokens and has credited the corresponding amount of ETH for credits, he can only “withdraw money” in the second phase of the consensus change.
“This essentially means that being an early validator locks your money in for about two years, which could be risky,” said Delphi spokesman. The mood is positive, though there is no further ICO hype
Challenges exist at a time when market sentiment for Ethereum has actually developed positively. Delphi’s analysis revealed that the presence of Ethereum in the spirit of the community was strongly linked to ICO interest, but that is changing.
“ICO tweet volume has been trending down in the last 12 months,” Delphi said. “Conversely, a short-term sign for ETH in the near future is that Ethereum’s mood is now at its longest positive stage since 2017.”
This is definitely something to consider. In a neighboring study cited by Delphi, it was found that the average daily sentiment rating is a “very strong indicator” of Ethereum’s price evolution, which has done wonders for its market capitalization in the past.
“Beginning in early January 2019, the average daily mood rating of Ethereum began to develop positively and has remained strong since then,” the analysts write. “The last time [we observed] was such a long positive mood in March-April 2018, when the market value of ETH more than doubled from 36 to 84 billion US dollars.” The framework for the Proof of Stake proposal in its present form is unlikely to be what its development team might hope might not be lucrative enough to motivate users to secure their ETH to secure the network, “said Delphi vs. Hard Fork.
“The various scenarios we have shown [in our report] make it clear that the results currently being proposed are clear [validating transactions] will probably not be enough,” he continued. “It is plausible to assume However, we do not believe that this is the most reliable way to achieve long-term sustainability. ”
Delphi Digital presented a proposal for an alternative structure to properly encourage crypto-currency fans to keep the network safe (note: higher network fees!) in the report, which is now public and here Published March 7, 2019 – 15:15 UTC.
