Market Update

More than a week after the Ethereum merge and the euphoria around the event begins to settle down we can set-back and analyse the data and the real impact of the event. We shall cover this in two aspects; the impact on users of the blockchain and the price impact on the ETH token; and secondly the impact on the miners who were on the Proof-Of-Work network.

Blockchain impact on users – token supply

Ethereum’s (ETH) annual token supply has dropped from 3.79% (88,736.70 ETH) to 0.20% (4,581.26) post-merge as per data from ultrasound.money. This has been possible following the network’s upgrade on September 15, from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) consensus, thereby also helping the network cut its carbon footprint by 99.95%.

The long-term impact of the reduction in supply ought to be reflected in the price of Volary. Since August 2021 under EIP-1559, miners are only paid a part of the transaction fees, with the rest burned and removed from the supply. Since the EIP when live, more than 2.6 million tokens worth slightly above $8.55 billion have been burned.

However, the number of tokens produced to pay for mining was ~12,500 tokens per day pre the merge. This caused Ethereum to still remain inflationary as total number of tokens kept increasing daily. Post the merge the issuance of tokens on a daily basis has dropped to ~772 still marginally higher than the number of tokens being burnt.

This has not had much impact on the price of ETH that has dropped 22% since the merge – but this trend might soon reverse as the token moves to a deflationary state, which would happen as the number of transactions increase leading to higher number of tokens being destroyed via fees. The increase in transactions will also increase the demand for the token – both factors that should lead to a price increase.

ETH Proof-of-Work Miners

With the merge all Ethereum miners had to look for alternatives and the forked Ethereum Classic and Ravencoin seemed to be safe havens to continue their mining operations. Post the merge many miners shifter operations to Ethereum Classic which saw the hashrate spike to 223.32 TH per second up from 58.12 TH the day before; the same has now stabilized to 160.32 TH per second. Ravencoin also experienced an increase in hashrate of 25% compared to pre-merge levels.

The major disappointment however has been the drop in price of the token with Ethereum Classic dropping 23.1% since the date of the merge and Ravencoin dropping 43%. So with majority of the miners having moved to other Proof-of-Work networks the price of tokens will be a crucial factor that will decided the viability of operations.

DeFi tokenS Outperforming

Crypto market’s continued their bearish price action as the U.S Federal Reserve’s decision to hike interest rates by 0.75% (or 75 basis points) announced recently. Leading crypto currencies Bitcoin and Ethereum have posted significant weekly losses, with Bitcoin dropping by over 5%.

Ethereum, meanwhile, dropped more than 20% over the past seven days. Despite the broader crypto market slipping in the wake of the Fed’s rate hike, DeFi tokens have defied the bearish market sentiment with their total market cap up over 30% to $45.89 billion over the past day and posting substantial gains.

• UNI, the token behind decentralized exchange (DEX) Uniswap, is up over 8% leading the gains among the top 20 cryptocurrencies by market cap; with a whopping 55% increase in trading volume to $130 million. With a market capitalization of slightly above $4.4 billion, UNI is the 19th-largest cryptocurrency. Despite this UNI is down 87% from its all-time high of $44.97 recorded in May 2021.

• LDO, the token powering popular Ethereum staking platform Lido, has also gained over 6.7%. The 67th-largest cryptocurrency by market capitalization, LDO, is down over 80% from its historical all-time high of $11 in November 2021.

• COMP, the governance token powering decentralized lending protocol Compound, posted gains of 4.5%. Trading volume for DeFi tokens has also jumped over 30% to $5.4 billion.

Voyager’s Assets to be purchased for $50mn

Voyager Digital one of the highest-profile crypto firms to go out of business earlier in July this year amid this year’s market crash. The firm’s demise was shortly after one of its largest debtors, the Singapore-based crypto hedge fund Three Arrows Capital (3AC), filed for bankruptcy leaving its user funds at risk.

3AC owed Voyager more than $650 million in Bitcoin and the stablecoin USDC. Another borrower was Alameda Research, a crypto trading firm founded by crypto billionaire Sam Bankman-Fried, who is also the owner of FTX. Alameda owed Voyager about $377 million worth of cryptocurrencies at the time of the bankruptcy filing. A month earlier in June, just prior to Voyager filing for bankruptcy, Alameda extended two credit lines to Voyager—one for $200 million in cash and a second for 15,000 Bitcoin. However, when Voyager filed for bankruptcy, Alameda was its largest creditor, with an unsecured loan of $75 million.

The auction for Voyager’s assets began on September 13 with bidders that include crypto exchanges Binance, FTX, digital asset manager Wave Financial and trading platform CrossTower. The winning bid is expected to be announced on September 29, although an announcement could come before that date with rumours that crypto exchanges Binance and FTX have reportedly made the top bids of approximately $50 million each for the assets of the bankrupt crypto lending firm Voyager Digital.

Cardano Hard-Fork – hardest updates since launch

A hard fork occurs when a network’s code fundamentally changes and requires the creation of a new and separate version of a blockchain. An example would be the hard fork occurred on the Ethereum network after the merge last week. It was an effort to preserve a proof-of-work version of Ethereum, which relies on miners to verify transactions.

The Vasil hard fork will leverage Cardano’s hard fork combinator technology which introduces new features without losing any data from the older version of the blockchain. The main benefit of the Vasil hard fork will be reduced transaction times. It will enhance Cardano’s smart contract capabilities through Plutus V2, which adds greater efficiency to an already powerful smart contract platform. It will also reduce script execution costs and transaction size, plus improve throughput.

The 5 days Cardano Vasil hard fork process which is underway and be complete by the 27th of September, allows for smart-contracts to be written with lesser code. This will result in more contracts that can fit into each block—or batch of transactions—on the network. It will benefit many projects that run on the network, one such DeFi project is the Indigo Protocol, which has been running its synthetic assets project on the Vasil testnet since July. Indigo allows users to trade synthetic versions of assets, like TSLA stock, without actually owning them.

Users can buy and trade iTSLA, which is backed by TSLA shares, through Indigo. The hard fork will reduce fee costs incurred by Indigo users by reducing the amount of script overhead for reading data from the blockchain.