27% of Ethereum Now Staked: $98 Billion Committed as Interest Peaks

April 17, 2024 Bitcoin.com

Solana price corrects as recent (SOL) rally factors come under question

November 6, 2023 Coin Telegraph

SOL price has started to cool off as investors potentially question the reasons for the most recent double-digit rally.

Solana (SOL) experienced a notable 36.6% increase in value between Oct. 30 and Nov. 2. However, SOL’s failure to breach the $44.50 mark resulted in a 10% correction down to $40 on Nov. 6. This movement has left many investors pondering whether the ecosystem growth and network activity support Solana’s present $16.9 billion market capitalization.

Solana's peak at $44.50 on Nov. 2 was the highest it had reached since August 2022, and coincided with the Solana Breakpoint 2023 global conference held in Amsterdam. The price hype during this period even prompted BitMEX co-founder Arthur Hayes to admit to being a "degen" and invest in SOL, despite referring to the token as "just a meme."

During the Breakpoint conference, the Solana Foundation unveiled the testnet launch of Firedancer, a new client aimed at enhancing speed, reliability, and reducing hardware requirements for validators, addressing a longstanding criticism of this layer-1 blockchain that offers parallel computing for smart contracts.

Additionally, on Oct. 31, the Solana Foundation announced the availability of its network dataset on Google Cloud BigQuery, a serverless data warehouse solution with built-in machine learning and artificial intelligence. This enables developers and companies to access archival data and analytical insights transparently and securely.

On the development front, the Solana Foundation has maintained a consistent level of activity. This includes the approval by validators in September of the v.1.16 update, which introduced confidential transactions for SPL tokens on the Solana network using zero-knowledge (ZK) proofs.

However, not all news has been positive for Solana despite its token's price performance. For example, on Oct. 17, the decentralized liquid staking protocol, Lido Finance, announced its decision to cease operations on the network, citing unsustainable financials and low fees, which led to a community vote sealing the service's termination.

The central question that lingers is whether the on-chain activity and metrics related to decentralized applications (DApps) support the SOL price hike. Thus, one should analyze how Solana's on-chain data and ecosystem growth compares to its competitors.

Solana’s reduced total value locked and activity pose considerable risks

Solana's primary DApp metric began showing weakness in September as the network's total value locked (TVL), measuring the amount deposited in its smart contracts, reached its lowest levels in over 2 years on Nov. 5.

*Solana network Total Value Locked, SOL. Source: DefiLlama*

Notably, Solana's DApp deposits experienced a 30% decrease in 30 days at 9.83 million SOL. As a point of comparison, Ethereum's TVL in ETH declined by 2% during the same period, while BNB Chain saw an 8% decrease in BNB terms.

Furthermore, Solana's low fees and continued development after the FTX-Alameda Research collapse have not necessarily translated into a large number of active users. Solana's largest decentralized exchange (DEX), Raydium, recorded only 17,380 active addresses in the past 30 days. Similarly, Solana's most widely used game, Star Atlas, had 12,420 unique addresses during the same period.

In contrast, BNB Chain's DEX, PancakeSwap, boasted 513,060 active addresses in the last 30 days, and its Stargate game had 106,400 users. Meanwhile, Avalanche's DEX, Trader Joe, garnered 54,130 active addresses, and its leading game, Galxe, had 32,040 unique addresses.

Perhaps more concerning is the fact that Solana's DApps' volume reached $609 million in the last 30 days, as reported by DappRadar. This number pales in comparison to BNB Chain's $11 billion, Polygon's $5.3 billion, and Avalanche's $727 million in DApps volume.

*DApps volume ranking, 30 days, USD. Source: DappRadar*

In addition to these issues, criticism has arisen regarding the need for Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements to become a network validator, as highlighted by user StakeWithPride on a social network.

To add to the concerns, X social network user arixoneth revealed that out of 1,997 validators, 1,818 received delegations from the Solana Foundation or Alameda, accounting for nearly 90% of all validators.

2/ I wrote a script to get precise numbers and here is what I got:

Out of 1997 validators 1818 received delegations from the foundation & Alameda.

In total they have delegated 106M SOL, 73M from the foundation and 33M from Alameda. pic.twitter.com/Il3eyabeZ8
— arixon.eth (@arixoneth) October 3, 2023

These participants effectively delegated 106 million SOL from these two entities, raising questions about centralization and dissatisfaction among SOL token holders, both concerning the validators and development subsidies as well as the comparatively small DApps user base in relation to other networks. Ultimately, Solana’s on-chain activity contradicts the recent price surge and does not support further price increases.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

dYdX launches layer 1 blockchain, validators and stakers set to receive all fees

October 27, 2023 Coin Telegraph

Blockchain

dYdX completes the launch of its layer 1 proof-of-stake blockchain with the creation of its genesis block by chain validators.

Decentralized cryptocurrency exchange dYdX has launched its layer 1 blockchain with the creation of its genesis block which will operate using native DYDX tokens.

The dYdX Chain is set to distribute all fees to validators and stakers in USD Coin (USDC). This includes trading fees denominated in USDC as well as gas fees for DYDX-denominated transactions or USDC-denominated transactions.

The proof-of-stake (PoS) blockchain network was built using Cosmos’ software development kit and makes use of CometBFT as its consensus protocol. Validators stake DYDX in order to secure the blockchain and carry out governance operations of the network.

The launch of the dYdX Chain network itself spanned a massive number of companies:

@dydx_ops_subdao coordinating genesis & launch generally + hosting indexer & frontend
@dydxfoundation coordinating community governance
@noble_xyz, @circleapp, @coinbase for launching…
— Antonio | dYdX (@AntonioMJuliano) October 26, 2023

Antonio Juliano, dYdX founder, highlighted that the launch of the dYdX Chain hinged on the likes of Circle and Coinbase launching on Cosmos in time for the creation of its genesis block. Juliano previously described dYdX as an "entirely new blockchain built on Cosmos SDK" and the "first-ever decentralized, offchain orderbook". The blockchain is also entirely open-source.

Before the launch of dYdX’s native layer 1 chain, the original DYDX was an ERC-20 token operating on dYdX’s original Ethereum layer 2 protocol. To facilitate the transition to its own layer 1 chain, the dYdX community voted to adopt DYDX as the L1 token of the dYdX Chain, adopt a one-way bridge from Ethereum to the dYdX Chain and to give wrapped Ethereum DYDX (wethDYDX) the same governance utility as ethDYDX in dYdX v3.

As a result of community votes and governance outcomes, the utility of the DYDX token has expanded to be used for staking, securing the network and assisting with governance on the dYdX Chain.

Similar to Ethereum’s transition to PoS, stakers and validators secure and protect the network and receive dYdX protocol feels in proportion to their staked assets. Fees collected by the dYdX Chain protocol are distributed to validators and stakers through the Cosmos distribution module.

An announcement from dYdX highlighted its expectation that the governance on the dYdX chain will be more accessible than its previous, Ethereum-based layer 2 protocol:

“The dYdX Chain does not have the dYdX v3 concept of ‘Proposing Power’; instead, the governance module effectively enables any holder to create a governance proposal with a deposit.”

Provisions to combat spam proposals include minimum deposit thresholds and voting mechanisms with veto powers. Users can only used staked DYDX tokens to participate in chain governance.

Chain validators will also inherit the voting weight of stakers, unless specific stakers opt to vote on proposals individually.

Magazine: Ethereum restaking: Blockchain innovation or dangerous house of cards?

Ethereum staking services agree to 22% limit of all validators

September 1, 2023 Coin Telegraph

Centralization

The 22% self-limit rule ensures at least four major staking entities would need to collude in order for the chain to reach finalization.

At least five Ethereum liquid staking providers have either imposed or are working to impose a self-limit rule in which they promise not to own more than 22% of the Ethereum staking market — seen as a move to ensure the Ethereum network remains decentralized.

Among the Ethereum staking providers either already committed or are working to commit to the self-limit rule include Rocket Pool, StakeWise, Stader Labs and Diva Staking, according to Ethereum core developer Superphiz.

Puffer Finance, another liquid staking service, also announced its commitment to the self-limit.

These providers are committed (or are in the process of committing) to self-limit to @Rocket_Pool @stakewise_io @staderlabs @divastaking
— superphiz.eth ️ (@superphiz) August 30, 2023

The proposal presumably aims to address concerns of Ethereum staking becoming increasingly centralized.

As to why the self-limit was proposed at 22%, Superphiz explained that because 66% of validators need to agree on the state of Ethereum, setting the limit below 22% means at least four major entities must collude in order for the chain to reach finalization.

Finality is the point where transactions on a blockchain are considered immutable, supposedly ensuring that transactions within a block cannot be altered.

The idea was proposed by Superphiz in May 2022 when he questioned whether a staking pool would be willing to put the health of the chain before its own profits.

Interestingly, the largest Ethereum liquid staking provider, Lido Finance, voted by a 99.81% majority not to self-limit back in June.

“They have expressed an intention to control the majority of validators on the beacon chain,” Superphiz said in an Aug. 31 post.

Votes casted from Lido (LDO) token holders on the self-limiting proposal. Source: Snapshot

Lido currently dominates the Ethereum staking market, accounting 32.4% of all staked Ether, while the next entity, Coinbase, accounts for only 8.7% of the market, according to data from Dune Analytics.

*Ethereum stakers by staking amount and market share, showing that Lido is the only one above the 22% threshold. Source: Dune Analytics*

Who’s in the right? Mixed reactions from the Ethereum community

One industry pundit, “Mippo,” explained on Aug. 31 that the self-limit proposal has nothing to do with “Ethereum alignment” — a principle understood to enable credible neutrality and permissionless innovation on Ethereum.

Mippo claimed those trying to push the proposal wouldn’t make way if they were in Lido’s position.

“Everyone is doing the economically selfish and rational thing here,” Mippo concluded.

Yeah because they have way less market share than that now… easy to chirp from the cheap seats.

This has nothing to do with “Ethereum alignment.” None of these teams would self limit were they in Lido’s place.

Everyone is doing the economically selfish and rational thing…
— Mippo (@MikeIppolito_) August 31, 2023

“Folks in the ETH community should not shame more user-friendly solutions as greedy products,” said another observer.

However, others were more wary of the potential centralization issues at hand, describing Lido’s market share dominance as “disgusting and selfish.”

Magazine: DeFi Dad, Hall of Flame: Ethereum is ‘woefully undervalued’ but growing more powerful

Ethereum logs $1M MEV block reward amid Curve Finance exploit

July 31, 2023 Coin Telegraph

Ethereum logs M MEV block reward amid Curve Finance exploit

block rewards

The highest recently generated block reward was 584 ETH, created by a MEV bot front-running transactions during the DeFi chaos.

The recent Curve Finance exploit has reportedly led to one of the largest ever maximal extractable value (MEV) reward blocks of 584.05 Ether (ETH).

On July 31, Ethereum core developer “eric.eth” reported that “today has produced some of the largest MEV reward blocks in Ethereum’s history,” adding it was caused by the exploit of Curve Finance stable pools on July 30.

Data shows a larger MEV reward block of 692 ETH was recorded in March.

“A bot notices an incoming hack in the mempool, reproduces the tx [transaction] and front runs it”, he explained before adding, “To do so they pay the block producer a lot of ETH to be front of the line.”

Today has produced some of the largest MEV reward blocks in Ethereum’s history.

Slot 6,992,273: 584 ETH
Slot 6,993,342: 345 ETH
Slot 6,992,050: 247 ETH
Slot 6,993,346: 51 ETH
— eric.eth (@econoar) July 30, 2023

A MEV bot is designed to generate extra revenue by reordering and/or inserting transactions in an otherwise normal block to generate arbitrage opportunities.

MEV bots can also see pending liquidation transactions and front-run them to buy the liquidated assets first at a discount.

The validator gets to propose a block using a relay that outsources their block production to entities specialized in extracting this extra revenue. They will get a cut of this revenue in exchange for allowing the MEV bot to front-run the transaction.

This is known as the “block reward” and some huge ones have been logged over the past few hours.

The highest MEV bot block reward was 584.05 ETH, valued at around $1 million, confirmed at 1.34 am UTC on July 31, according to Beaconcha.in. There were also block rewards for 345 ETH and 247 ETH around that time.

Moral questions were raised among the responses to the tweet and the implications of potentially illicit funds being used to pay validators to allow the front-running of transactions.

“And this is where the morality of MEV rewards going to miners gets pretty shady. These are effectively hacked funds.”

In April, a Subway-themed trading bot made millions in extractable value by using “sandwich attacks” during the memecoin trading frenzy.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Magazine: Should crypto projects ever negotiate with hackers? Probably

3 reasons why Ethereum’s market cap dominance is on the rise

June 21, 2023 Coin Telegraph

bnb

Bitcoin dominance is rising, but so is Ethereum’s share of market dominance among its altcoin competitors. Cointelegraph explains why.

Ethereum has been the dominant smart contract and decentralized application (Dapp) network since its inception. An analysis based on Ether’s price (ETH), and its market capitalization, shows indisputable evidence that the blockchain has been gaining market share over time.

*Ether market capitalization dominance (%). Source: TradingView*

As shown above, Ether’s dominance in market capitalization terms grew over the past couple of years, from an 18% average in July 2021 to the current 20%. Excluding Bitcoin (BTC) from the analysis, Ether’s market share presently stands at 40.6%, while the next competitor, BNB, holds a 7.2% share.

This shows the disparity from the leading Dapp-focused network to the incumbents, which is also evident when analyzing the total value locked (TVL) on each network’s smart contracts. Ethereum is the absolute leader with $24.6 billion in TVL, followed by Tron’s $5.4 billion and BNB Chain’s $3.3 billion.

*Total value locked market share (%). Source: DefiLlama*

The above chart depicts the Ethereum network’s TVL market share declining from 70.5% in June 2021 to 49.5% in May 2022. The movement happened while Terra and Avalanche gained a combined 20% market share in smart contract deposits. However, after the Terra-Luna ecosystem collapse in May 2022, which culminated with developers halting network activity, Ethereum quickly regained a 58% market share.

Despite the emergence of Dapps on the BNB and Tron blockchains, Ethereum’s leadership has remained unquestioned over the past 12 months. This data shows the irrelevance of the total number of unique active wallets interacting with smart contracts (UAW) per chain.

For instance, according to DappRadar, WAX has 363,600 active users, followed by BNB Chain's 517,300 30-day UAW. These figures are way higher than the Ethereum network’s 66,300 unique active addresses, but they reflect a much lower transaction fee, opening room for manipulation.

Decentralization matters, and Ethereum stands out among its competitors

Ethereum is the ecosystem with the highest number of active developers, surpassing 1,870, which is more than the next three competitors combined: Polkadot (752), Cosmos (511), and Solana (383).

Currently, the Ethereum network has over 700,000 validators, with 99% of the balances locked in staking participating in the process. The 32 ETH threshold limit per validator undoubtedly inflates this number, but Lido, the largest known staking pool, controls 32% of the staking, with Coinbase coming in second with 9.6%.

Consequently, it is safe to say that Ethereum is far less centralized in terms of development and validation in comparison to Tron, BNB Chain and Solana.

Other reasons why Ether’s dominance has been on the rise, even as Bitcoin reached a 50% market share on June 19 are: derivatives activity and Ethereum’s dominance of the NFT market

Derivatives markets are essential to institutional investors

Ether’s future contracts are essential for institutional trading practices like hedging and trading with leverage. Ether’s cash-settled futures were added to the Chicago Mercantile Exchange in February 2021. To date, no other cryptocurrency, apart from Bitcoin, has ever reached the world’s largest derivatives exchange.

In futures markets, longs and shorts are balanced at all times, but having a larger number of active contracts — open interest — allows the participation of institutional investors who require a minimum market size. Ether futures aggregated open interest stands at $5.4 billion, while competitors BNB hold $380 million and Solana a mere $178 million.

Ethereum is still the market leader in NFTs

Nonfungible tokens (NFT) are a perfect example of how cheaper and faster transactions do not always translate to increased adoption. There’s nothing stopping NFT projects from shifting between blockchains, whether for new listings or existing collections. In fact, y00ts and DeGods moved to Polygon earlier in 2023.

Despite facing gas fees that oftentimes break above $10, Ethereum remains the absolute leader in the number of buyers and total sales. According to CryptoSlam!, the leading network reached $380 million in sales in the past 30 days, while Solana, Polygon and BNB Chain totaled a combined $93 million.

Ultimately, the data favors Ethereum versus the competing smart contract-focused blockchains. The positive trend in Ether’s dominance might fade over time if the promised upgrade to allow parallel processing (sharding) does not come to fruition, but for now, Ether’s 20% market capitalization share remains unchallenged.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Vitalik Buterin warns against overloading Ethereum consensus

May 22, 2023 Coin Telegraph

Coin Telegraph

Buterin has advocated preserving Ethereum consensus minimalism and not overloading validators with other things.

Ethereum co-founder Vitalik Buterin has published a lengthy blog post warning of the dangers of “stretching” Ethereum's consensus past its core functions of validating blocks and securing the network.

Ethereum consensus is the process whereby blocks are validated by the proof-of-stake mechanism implemented in September 2022 with “the Merge.”

In a May 21 blog post titled “Don’t overload Ethereum’s consensus,” Buterin warned that using Ethereum’s network consensus for other things could bring “high systemic risks to the ecosystem and should be discouraged and resisted.”

The Ethereum co-founder was essentially promoting the preservation of the blockchain’s minimalism.

Don't overload Ethereum's consensus:https://t.co/07tzyCrZcJ
— vitalik.eth (@VitalikButerin) May 21, 2023

Buterin noted that over the years, a number of proposals or ideas had floated around that suggested using the Ethereum social consensus for other purposes, such as price and data oracles, re-staking initiatives and using layer-1 soft forks to recover layer-2 projects should they have issues.

“There is a natural urge to try to extend the blockchain’s core with more and more functionality because the blockchain’s core has the largest economic weight and the largest community watching it, but each such extension makes the core itself more fragile.”

Buterin said that a certain subset of these techniques could bring “high systemic risks” to the ecosystem, such as bugs or an intentional 51% attack.

Some high-risk examples include creating ETH/USD price oracles in which ETH (ETH) holders or validators can be bribed to vote on, which may result in a “fork out the bad participants' money” if there is disagreement.

However, he acknowledged a need for better oracles, proposing a case-by-case approach because various problems are “inherently so different” from each other.

Overall, Buterin said that any expansion of the “duties” of Ethereum's consensus increases the costs, complexities, and risks of running a validator.

Application-layer projects “taking actions that risk increasing the ‘scope’ of blockchain consensus to anything other than verifying the core Ethereum protocol rules,” should be treated with caution, he said, summarizing:

“We should instead preserve the chain’s minimalism, support uses of re-staking that do not look like slippery slopes to extending the role of Ethereum consensus, and help developers find alternate strategies to achieve their security goals.”

The Ethereum consensus mechanism switched from proof-of-work to proof-of-stake in September last year. Additionally, staked Ethereum has only just been released for withdrawal with the Shapella upgrade on April 12. This explains the increased scrutiny of validator roles and security risks on the world’s largest smart contract network.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

Ethereum’s Shapella Upgrade Unlocks Staked Ether, Over 860K ETH Poised for Withdrawal, Price Surges 6%

April 13, 2023 Bitcoin.com

Ethereum’s Shapella Upgrade to Enable Staking Withdrawals Set to Go Live on April 12

April 12, 2023 Bitcoin.com

Less than 1% of staked ETH estimated to sell after Shanghai upgrade: Glassnode

April 12, 2023 Coin Telegraph

Beacon Chain

The analytics firm backed up its prediction, stating only 253 validators have signed up to fully exit their staked Ether position.

An estimated 170,000 Ether (ETH) of the total 18.1 million ETH staked on the Beacon Chain will be unlocked within the first week of the Shanghai hard fork being executed on Ethereum, Glassnode has predicted.

The figure will comprise 100,000 Ether ($190 million) staking rewards and 70,000 ETH in staked Ether ($133 million) hitting the market the on-chain intelligence platform predicted in its April 11 report.

Glassnode backed up its prediction by explaining that only 253 depositors are waiting to exit their stake and that a few mechanisms are in place to prevent a flood of Ether supply from hitting the market all at once.

The highly anticipated Shanghai/Capella hard fork is scheduled to take place on 12-April-2023, enabling the withdrawal of staked #Ethereum.

In this extended edition of the Week On-Chain, we shall evaluate the overall Ethereum staking landscape, develop a framework to establish… pic.twitter.com/EVgsz3s6GG
— glassnode (@glassnode) April 11, 2023

The 253 exiting depositors own a total of 1,229 validators, while another 214 slashed validators will be forced out as soon as Shanghai is activated on Ethereum with Glassnode confident the hard fork will not have a "dramatic" impact on Ether's price action:

“Even in the extreme case where the maximum amount of rewards and stake are withdrawn and sold, the sell-side volume still falls within the range of the average weekly exchange inflow volume.”

“Therefore, we conclude that even the most extreme case will have an acceptable impact on the price of ETH,” the firm added.

Data shared by Glassnode found that only 22% of the 253 exiting depositors are currently in profit too.

*The types of organizations, size, age and profitability of each of the 253 exiting Ethereum validators. Source:* *Glassnode*

Glassnode expects a large amount of Ether to be withdrawn from the crypto exchange Kraken after the legality of its staking services was challenged by the United States Securities and Exchange Commission (SEC).

It also anticipated that crypto lending platform Celsius may withdraw a large amount to sell its staked Ether as part of its bankruptcy proceedings.

However, it is unlikely that Kraken and Celsius will make these withdrawals as soon as Shanghai is activated, it said.

*Approximately 11.2% of the Ether staked on the Beacon Chain is operated by Kraken’s staking service. Source:* *Glassnode*

The average deposit price across all staked ETH is $2,136, down 12.7% from Ether’s current price of $1,865, which equates to a net unrealized loss of $4.7 billion, Glassnode said:

“After the peak unrealized loss of $16B in July 2022, the net unrealized loss now amounts to $4.7B. It is mainly carried by the Whale sized depositors, who hold a 76% share of the unrealized losses.”

Global financial firm Fidelity Investments is also of the view that Shanghai won’t have too much of an impact on Ether's price action.

It explained in an April 5 report that “selling pressure will be muted due to the likelihood of partial withdrawals being re-staked as well as the length of time the withdrawals will take.”

The Shanghai upgrade is set to take effect on April 12, 10:30 pm UTC according to blockchain infrastructure firm Blocknative.

The unlocking of staked Ether will be enabled by Ethereum Improvement Proposal-4895.

Of the five EIPs that will be activated by Shanghai, it is by far the most anticipated one as it will move Ethereum one step closer to a fully functional proof-of-stake system.