EIP-1559 and Binance's European Holiday
EIP-1559 and Binance's European Holiday
CRYPTODAY 016
While Bitcoin and most of the base-layer cryptos have retreated from Monday’s promising start, many of the DeFi and DApp tokens have been enjoying double-digit gains since trading resumed for North America. Some of the biggest gainers include AAVE (+12%) CAKE (+12%) SNX (+25%) COMP (+10%) and SUSHI (+12%), but none of them are currently outdoing AXS, which broke its ATH a few hours ago and is currently +40% since the 5th.
Speaking of outdoing oneself, the People’s Bank of China has been pulling out all the stops recently, not just by chasing away the majority of the world’s crypto mining businesses, but now even closing down businesses who were providing software services to crypto companies. The automated English translation of the statement above explains that the PBOC has “cleaned up and rectified Beijing Tongdao Cultural Development Co., Ltd., which was suspected of providing software services for virtual currency transactions, and ordered the company to cancel.” I’m sure the real verbiage is lost-in-translation, but “cleaned up and rectified” is weirdly appropriate for the dystopian society that the PBOC appears to be building.
Kraken put together this really nice infographic describing the average Bitcoin returns following a China crackdown, and it was a nice walk down memory lane for me looking at all the times over the years the crypto community appeared to implode as a result of bad news out of Beijing.
Brazilian police recently arrested their local Bitcoin King (or perhaps more correctly, their local Bitcoin Kingpin), the president of a popular ponzi called Bitcoin Banco Group, on charges of fraud and money laundering. The group had reportedly scammed over 7,000 Brazilians out of a total of $300 million in personal investments, and does not actually appear to hold any of their promised bitcoins. Our very own Xian Gaza, progenitor of the Xiancoin scam, has neither the intelligence nor the reach to hit numbers like these, but I dream of a time when our NBI Cybercrime division has the political will to go after all the small-time crypto fraudsters on our side of the world too.
This year’s big Ethereum protocol EIP-1559 upgrade (this is not ETH2.0) is now being scheduled for network implementation. The final decision for when it’ll go live will be DISCUSSED at a core developer meeting this Friday 10am Manila time, although it’s looking like August 4th is the target.
If you don’t know what EIP-1559 is, here’s the two-minute guide: Most blockchains (including Bitcoin and Ethereum) use an auction system for determining network fees. During times with lots of traffic, users can offer to pay more to have their transactions bumped up in the queue, but because this is an inaccurate process (it’s difficult to tell beforehand if your bid is good enough) there’s a lot of time and money wasted. The EIP-1559 improvement replaces the “fee market” with a fixed price that is dynamically determined by the network itself. The key difference here is that when two users transfer at the same time on the same block, they will pay the same amount; you’ll no longer see these massive disparities in fees between similar transactions. Users can still override the fixed price by “tipping the miners” or paying extra, but they can’t pay less than the base fee levied by the network.
The other more macro effect of EIP-1559 is that all the fees won’t go to the miners anymore. Instead, the base fees get burned, which means that the ETH supply will be reduced block by block as soon as this goes live. Estimates indicate that ETH’s circulating supply will decline at a rate roughly 1% to 4% per year. The miners were initially resistant to this change because of the reduced earnings, but the price implications of the manufactured scarcity eventually won them over. If you’re starting to see dollar signs, know that this upgrade is the first time a miner compensation system like this has ever been attempted at the scale of Ethereum … and that’s primarily because there is no blockchain that currently operates at the scale of Ethereum. (Here’s a more in-depth guide for the technically inclined.)
A little over a week ago I wrote about how Binance was having issues with UK regulators, and that situation is starting to look more dire than I first thought. It was reported on Monday that Barclays had also started blocking all of its UK customers from depositing funds with Binance, and earlier today the news broke that SEPA customers could no longer make deposits either. Not being able to interact with SEPA is a much bigger deal than the UK debacle, as that’s the main intercontinental payment network used by the 36 countries in the European region. I can’t imagine this has been a great month for the Binance EU team, although at the time of writing, $BNB is still up by about 3% from the start of the day.
See you all on Friday, cryptofam!