Ether moves closer to the deflationary territory
According to data from the Ultrasound.money dashboard, ether’s issuance rate has reduced by more than 95% since the network has transitioned to the proof-of-stake (PoS) consensus mechanism earlier in September. The top burners of ether are decentralized exchange Uniswap and the OpenSea NFT marketplace.
Ether’s issuance is currently determent by block rewards and the burn rate. Validators receive ETH as a reward for adding new blocks, roughly every 12 seconds, and the size of the reward depends on the amount of ether staked on the network.
In an attempt to increase the price of ether, the community has implemented the EIP-1559 in 2021, which changed network’s fee mechanism in such a way that a big portion of transaction fees is being burned.
Unlike Bitcoin, Ethereum has seen its monetary policy changed multiple times in the last two years:
The EIP-1559 introduced fee-burning mechanism,
The Merge reduced ether’s issuance,
The transition away from energy-intensive proof-of-work (PoW) reduced selling pressure since miners stopped selling ether to pay for their massive electricity bills.
As a result, ether is expected to become a deflationary asset during the next bull market, when the onchain network activity historically spikes, leading to higher transaction fees.
On that note, Ethereum’s average block time has decreased post-Merge, leading to more blocks being produced every day.
The price of the mining equipment such as Nvidia GeForce RTX 3080 has significantly dropped in the last three months as Ethereum ditched out miners.
It’s important to mention that the Merge wasn’t planned as a scaling solution, so it didn’t reduce network’s transaction fees. The community is betting on rollups and other off-chain solutions to push scalability forward until sharding goes live on the mainnet later in 2023.
The next major upgrade — codenamed Shanghai — is scheduled for March 2023 and is likely to include the EIP-4844, known as Proto-danksharding, which suppose to improve scalability for rollups and move the protocol closer to sharding.
Nearly one out of every two Ethereum blocks censor sanctioned transactions
According to Lachan Feeney, the CEO of blockchain development agency Labrys, the reports that 25% of all blocks validated since the Merge censor Tornado Cash transactions due to US sanctions is a lagging indicator with the real number being close to 45%.
Feeney explained that in order to increase profits many validators outsource block production to MEV-Boost relays, some of which are regulated businesses that have to comply with sanctions. The most popular MEV-Boost Relay called Flashbots doesn’t include any transactions from sanctioned addresses into the blocks.
Since validators are not yet forced by regulators to reject blocks that contain sanctioned transactions, all transactions will still be included in the blockchain, but it will take longer time and potentially cost more in fees to interact with sanctioned addresses.
In other news
The Terra Classic community introduced a 1.2% burn tax on all on-chain transaction in an attempt to reduce the total supply of its LUNC token, previously known as LUNA. Following the pressure from the community, Binance has also announced that it will burn all trading fees from spot and margin LUNC pairs.
Following months of dispute, Ripple Labs — the company behind the XRP token — scored another victory in its potentially precedent-setting legal battle with the US financial watchdog. A US District Judge ordered the SEC to provide the documents related to the 2018 Hinman speech, in which the former Division Director said that Bitcoin and Ether are not securities.
Due to a misconfigured node, the Solana (SOL) network has experienced another major outage this year. Developers have restarted the network from the last confirmed slot #153139220. In September 2021, the Solana network went down for nearly 18 hours. The blockchain froze for about seven hours in May and for about four hours in June.
CoinDesk Korea reported that shortly after the South Korean authorities issued an arrest warrant for Terra (LUNA) founder Do Kwon, around 3,313 BTC has been transferred from Kwon to overseas crypto exchanges. Earlier in September, Interpol has issued a “red notice” for Kwon on the request of Seoul prosecutors while South Korea’s Ministry of Foreign Affairs tried to revoke his passport.