#44: All Gas No Brakes

Effects of ETH gas prices on node operators, NuCypher worklock, Coda Snapps, Tezos Harbinger and Delphi, Ethermint, and more!

This newsletter is supported by Chorus One, a provider of staking services in decentralized networks.

Gas Price Effects on Node Operators

A looming bull market combined with lots of yield farming activity led to gas price levels unseen since peak CryptoKitties hype in 2017 (see e.g. Etherscan’s historical chart). Vitalik’s thread on the supply and demand economics of gas is really helpful and shows why scaling really is the only viable solution:

As a side effect of the high gas prices, node operators on protocols managed on Ethereum are experiencing costs that threaten the profitability of their business and, as a result, the viability of the protocols themselves. As an example, ChainLink node operators have paid roughly twice as much on gas in dollar terms as they’ve earned in LINK tokens last week (based on Felix’ observations for Chorus One) to keep prices updated for the $3bn locked in DeFi protocols that rely on ChainLink price oracles. Livepeer orchestrators are also feeling the pain when calling daily rewards. For example, Chris recently paid $100 to send a call reward transaction. The Livepeer team submitted this proposal to mitigate the high reward calls gas cost. ChainLink also reacted quickly and adjusted LINK payments, but this highlights that protocols built on a shared platform like Ethereum will need to take into account gas price fluctuations and scenarios like the one we are seeing play out now.

There is a need for developers to make use of layer-2 scaling solutions and a potential opportunity for other layer-1 or application-specific chains to gain some market share from people migrating away from Ethereum. One recent example is the NFT project Mintbase migrating to NEAR based on the unsustainability of continuing on Ethereum, check out founder Nate’s reasoning and evaluation of alternatives here.

Network Updates

  • NuCypher Worklock: NuCypher’s innovative WorkLock token distribution mechanism went live on September 1st and lasts until September 28. This is the escrow period, during which participants can escrow ETH in exchange for NU. The minimum escrow amount is 5 ETH and participants who escrow that amount are “guaranteed to receive 15,000 NU.

  • Coda Snapps: Coda’s testnet is upgrading to a new proof system Pickles in stage 3.3, which will enable efficient smart contract applications powered by zk-SNARKs (Snapps).

  • Tezos Harbinger and Delphi Upgrade: The Tezos protocol is gearing up to nurture the development of a DeFi ecosystem running on top of it by introducing a decentralized price oracle named Harbinger. This set of tools and reference contracts allows price feeds to be posted onto the Tezos blockchain. Harbinger also includes a reference signer that can be deployed at low cost by exchanges. Furthermore, Delphi, an interim upgrade proposal has been suggested and injected to be voted on by governance. If implemented, Delphi improves the performance of the Michelson interpreter and Tezos’s gas model.

  • Cosmos Ethermint Release: Last week marked the release of Ethermint v0.1.0. Ethermint is a Cosmos SDK module that provides standard Ethereum functionality for Cosmos blockchains. With Ethermint, Cosmos chains implementing the module can be fully harmonious and interoperable with the EVM, Ethereum smart contracts, tooling, etc. Ethermint is also designed to be IBC compatible and marks the next step in Cosmos' vision of an internet of blockchains.

  • Secret Network: The Secret Network will activate “secret contracts”, privacy-preserving smart contracts on its mainnet in the coming weeks. There will also be a staking derivative contract that will allow users to earn SCRT staking rewards while maintaining liquidity.

  • Serum Launch: Serum, the highly anticipated, non-custodial decentralized derivatives exchange platform built on Solana launched on August 30th. Serum’s initial product is an on-chain central limit order book (CLOB). Serum is set out to build a thriving DeFi ecosystem supporting various stablecoins, oracles, as well as cross-chain assets swaps. The project actively calls for community engagement, so if you have an idea or want to get engaged, head over here.

  • Terra 2020 Roadmap: Terra hit the 2 million account milestone and released a huge roadmap update including information on upcoming CosmWasm smart contract capabilities, tooling, as well as the state of the Anchor protocol.

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Staking Economy is written by Felix Lutsch from Chorus One with contributions by Chris Remus (Chainflow), and Robert Dörzbach (Staking Facilties). Join us in the Staking Economy Telegram to discuss staking. Opinions expressed are our own and do not necessarily reflect the opinions of our companies. All content is for informational purposes only and not intended as investment advice.