The state of the Ethereum network
After a short period of relatively low transaction fees, the Ethereum network has slowly started clogging again, with gas prices occasionally hovering around 40-50 gwei during weekdays - more than $10 per regular DEX swap.
The London network upgrade has been scheduled to go live at block 12965000 approximately on August 5, bringing long-awaited and somewhat controversial EIP-1559 to the mainnet. The upcoming upgrade will change the current auction fees structure to a two-tiered system called “Base Fee and Tips”. Under the new mechanism, the base fee will be automatically determined by an algorithm and adjusted based on congestion.
Although EIP-1559 won’t solve the scaling problem, it will make transaction fees much more predictable and potentially slightly decrease competition for the block space, since miners will accept transactions even above 15 million gas limit during network’s high load, because the new mechanism will aim for 50% full blocks.
The most controversial part of the London upgrade is the change in how transaction fees are being distributed. In the traditional model, which is currently utilized by Bitcoin, Ethereum, and most other cryptocurrencies, miners keep all the transaction fees alongside block rewards. Under the new mechanism, however, the base fee will be burned, so miners will only receive a small portion of transaction fees, known as “tips”, which will deprive them from extra earnings during lucrative times of network congestion.
The majority of Ethereum developers and investors seem to support this upgrade because burning the base fee will decrease the supply of Ether, which will decrease selling pressure and have a positive impact on the price of ETH. According to them, block rewards should provide enough incentives for miners to secure the network a little longer until Ethereum fully transitions to Proof-of-Stake.
Many miners, on the other hand, oppose such change, saying that it punishes active participants (miners), who secure the network, and instead benefits whales, who simply hold large amounts of Ether in their wallets.
Later in 2022, the Ethereum network is planning to fully transition from the current Proof-of-Work to Proof-of-Stake consensus algorithm, with sharding that will delegate the validation of transactions to 64 shards, significantly improving the total transaction throughput.
More adoption, more exploits
While Ethereum’s onchain scaling solutions are still on the way, many developers continue exploring side chains and layer-2 solutions, with major DeFi projects Uniswap and Synthetix announcing launches on Optimism.
Since many off-chain scaling solutions require moving funds between different chains and protocols, users have to use so-called bridges to deposit and withdraw their tokens from such systems. That, unfortunately, adds more attack vectors to DeFi “money-legos” - in fact, two major bridges have been exploited this month.
The new version of cross-chain bridge Anyswap suffered from an attack that resulted in a loss of 2.4 million USDC and 5.5 million MIM stablecoins. According to its post mortem, only the new multichain prototype v3 router got exploited, while v1 and v2 bridges remained unaffected.
Following a recent hack that resulted in a loss of $800K, cross-chain bridge ChainSwap was exploited again to the tune of roughly $8 million due to a critical security flaw in its smart contract. Many DeFi projects using this bridge — such as Wilder Worlds (WILD), Antimatter (MATTER), Optionroom (ROOM), to name a few — have been affected by the exploit.
To be noted, earlier in April, ChainSwap raised $3 million from big industry players that include Alameda Research, CMS Holdings, and OKex’s Block Dream Fund, among others.
In other news
Chinese video-sharing app TikTok has prohibited its users from promoting cryptocurrencies alongside with other financial products and services, including forex trading. TikTok has been widely used for the promotion of various high-risk investments and cryptos, such as the infamous meme coin Dogecoin (DOGE).
Decentralized autonomous organization Index Cooperative (INDEX) raised $7.7 million in a funding round led by investment companies 1kx and Galaxy Digital. Index Coop is the leading DeFi index protocol by total value locked (TVL), with its flagship product named DeFi Pulse Index.
The Sushi community joined the non-fungible token craze by announcing its own NFT platform Shoyu, which is set to go live in August. Earlier in May, American publicly traded company GameStop started building a team to develop its NFT platform on the Ethereum blockchain.
The Bitcoin Satoshi Vision (BSV) network has suffered from a block reorganization attack, which resulted in a successful double-spend, followed by suspension of deposits and withdrawals by major exchanges. Bitcoin Association, founded by major BSV supporter Calvin Ayre, announced it is working with law enforcement and will pursue legal action against the attacker.
Non-custodial crypto exchange ShapeShift announced an airdrop of its governance token FOX to over 1.1 million addresses of its customers and users of various DeFi projects such as Gitcoin, Uniswap, SushiSwap, and Yearn. Airdrops have to be claimed within 90 days. ShapeShift, a parent company of KeepKey and Portis, was founded in 2014 by American early crypto adopter Erik Voorhees.