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Ethereum: Death Through Economic Abstraction?

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Cryptocurrency entrepreneur Jeremy Rubin caused quite the stir last week when he declared the collapse of Ethereum to be inevitable. In a TechCrunch article that appeared on Sept. 2, Rubin argued that Ethereum’s scalability issues and failure to adopt more secure contract authoring practices would eventually lead ether to be upstaged by its competitors. Ethereum co-founder Vitalik Buterin took to Reddit on Monday to issue a lengthy response to the article.

Death by Economic Abstraction

The core of Rubin’s argument centers on “economic abstraction,” a term used by the Ethereum community to describe gas payments in a non-ETH asset. Economic abstraction is basically paying smart contract fees through an ERC-20 token instead of Ethereum. In Rubin’s view, allowing smart contract fees to be paid in ERC-20 tokens will eventually make Ethereum redundant, leading to its price collapse.

To illustrate this point, he used the example of “BuzzwordCoin,” a fictional decentralized application that will pay gas in ether. According to Rubin, requiring every BuzzwordCoin transaction to also depend on Ethereum for fees creates significant risk, third party dependency and downward pressure on the underlying token price. In other words, if a user had to sell BuzzwordCoin for ether ahead of time to facilitate a BuzzwordCoin transaction, then the selling will happen before the transaction needs it.

Rubin adds the following:

“Instead of paying for Gas in ETH, we could make every BuzzwordCoin transaction deposit a small amount of BuzzwordCoin directly to the block’s miner’s address to pay for the contract’s execution. Paying for Gas in a non-ETH asset is sometimes referred to as economic abstraction in the Ethereum community.”

Vitalik Responds

In a lengthy Reddit response, Vitalik Buterin partially agreed with Rubin’s analysis but said Ethereum is “likely not doing “full economic abstraction.””

“In Ethereum as it presently exists, this is absolutely true, and in fact, if Ethereum were not to change, all parts of the author’s argument (except the part about proof of stake, which would not even apply to Ethereum as it is today) would be correct.”

To address economic abstraction, Buterin clarified that developers are considering two proposals that require ETH to be paid at the protocol level. The two proposals – modified fee market and storage maintenance fees – would basically make gas payments in ether mandatory.

Buterin said economic abstraction can still happen at the user level but block proposers would still need to “cough up ETH.”

ETH/USD Price Update

Ethereum declined sharply on Wednesday as part of a wider market pullback. At the time of writing, the ether price was down 9.9% at $259, according to CoinMarketCap. The second-largest cryptocurrency by market cap briefly traded above $300 over the weekend but was unable to hold that critical  level. The panic sale has put ether at a weekly loss of more than 11%.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 601 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Ethereum

Ether Price Spikes Suddenly and Sharply

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Ethereum’s price rose quickly and sharply Tuesday morning, as technical traders appear to have pushed a corrective rally following yesterday’s steep selloff. Beyond that, there were no obvious reasons for the dramatic reversal.

ETH/USD Update

Ether’s value spiked more than 8% on Bitfinex to reach $211.80, according to latest available data. The unusual bout of volatility appears to have originated more than 1 hour ago amid a surge in volume on Bitfinex. At the time of writing, the exchange’s daily turnover in ETH amounted to 388,680. The cryptocurrency reached a session high of $222, completely reversing Monday’s downturn.

CoinMarketCap has also acknowledged a sharp rise in ETH trading volumes. At the time of writing, total trade volumes across all exchanges was higher than $2.2 billion. That accounts for nearly 16% of total market turnover.

On Monday, ether recorded a steep decline from $220 to $190 after the market failed to make new highs during the weekend. It’s not entirely clear whether the latest upsurge is part of a more coordinated effort to lift the market or simply reflects a bounce from oversold levels.

Crypto Market Approaches $200 Billion

Ethereum’s sudden advance helped push the cryptocurrency market closer to $200 billion. XRP, the third largest crypto by market cap, had initially led the recovery amid news of major commercialization efforts involving Ripple’s technology. XRP is currently trading at more 11-day highs, according to latest available data.

Bitcoin, which accounts for more than 55% of the total market cap, has also recovered from its recent five-day low. It currently trades around $6,374, down just 0.9% compared with Monday. BTC had declined more than 3% on Monday as prices fell to the mid-$6,200 range from a high near $6,500.

With the exception of XRP and a few other cryptocurrencies, fundamentals have struggled to explain the market’s recent moves. The market bottomed near $186 billion last week before staging a nearly $20 billion relief rally through the weekend. Since then, trading conditions have been fairly tepid.

Ethereum’s volatile moves over the past two months reflects deeper issues for the so-called developer’s cryptocurrency. The loss of “reservation value” amid what appears to be an ICO exodus has left ether’s price susceptible to vicious downturns. Not only are ERC-20 startups liquidating their holdings of ETH, uptake in new coin offerings appears to have declined sharply. ICOs raised just $337 million last month, the lowest in over a year. What’s more, September is shaping up to be an even worst month in terms of total secured funding.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 601 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Crypto Update: Monday Selloff Drags Majors Lower

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The cryptocurrency continues to show mixed short-term signs following last week’s Ethereum-led bounce, and the subsequent consolidation. Today, all of the majors sold off after the US open, triggering downgrades in our trend model, but the two largest coins, barely, retained their short-term buy signals, holding up above key support levels.

Ethereum remained north of $200, while Bitcoin is still above the $6275 level, but the total value of the market is back at $195 billion as BTC failed to gain ground during last week’s rebound, and as several coins failed to join the move. The odds of a failed rally got higher after today’s selloff, and the move still only qualifies as a counter-trend one, with the long-term downtrends being in no danger in most cases.

XMR/USD, 4-Hour Chart Analysis

Monro, which has been the third major on a short-term buy signal, is also still positive in our model, despite bouncing lower off the $120-$125 resistance zone and getting close to testing the $108 support level. The coin is now trading slightly below the rising short-term trendline and it would need to show strength quickly to retain stay on a buy signal. Further support is found near $100, while key long-term resistance is ahead at $150.

ETH/USD, 4-Hour Chart Analysis

Ethereum fell back to the $200-$205 support zone today, and the coin is trying to establish a swing low, following the initial rally of its 15-month low. Despite the pullback, ETH is still on a short-term buy signal, but given the segment-wide long-term weakness, traders should still not enter full positions. A sustained move below $200 would warn of a test of the lows and a possible new leg lower, with strong resistance still ahead at $235 and $260 and with further support found at $180.

Market Still Lacking Sustained Strength

BTC/USD, 4-Hour Chart Analysis

Bitcoin fell back to $6275 again after failing to show bullish momentum last week, and although BTC is still trading with relatively low volatility, well above the crucial support zone near $5850, the recent days are not positive for crypto-bulls. A sustained move below primary support would warn of a test of the weaker support near $6000 and a likely move to the key long-term zone, with resistance levels now ahead at $6500, $6750, and $7000.

XRP/USDT, 4-Hour Chart Analysis

Ripple’s weakness is also a warning sign for bulls, as the third largest coin not just failed to join the rally last week, but it turned lower today, threatening with another move towards the August lows. XRP is still trading within its short-term range, and it remains on a neutral short-term signal, but further weakness could quickly trigger a sell signal. Support below $0.26 is found near $0.23, while resistance is ahead at $0.30, $0.3130, and $0.32.

EOS/USD, 4-Hour Chart Analysis

EOS also remained weak during the recent altcoin bounce and now it is back on a short-term sell signal after dipping lower together with the broader market, plunging below $5 yet again. Now, a test of the August lows and a move to $4 is once again the most likely, with only the support between $4.55 and $4.65 found above the August low, while strong resistance is ahead between $5.35 and $5.55.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 347 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Ethereum

Ethereum Hard Fork to Launch on Testnet in Early October

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Ethereum core developers have been feverishly working on Constantinople, which is the next upgrade of the network. According to a recent Ethereum Core Devs Meeting, devs will be ready for the hard fork release soon, and the hard fork of testnet Ropsten has been scheduled to launch on around Oct. 9. It could serve as a boon for the ETH price, which despite its recent rally could use another catalyst.

The Constantinople upgrade is phase-two of Metropolis, the first phase of which was the Byzantium fork. It’s expected to bolster efficiency and slash costs on the Ethereum blockchain. The widely watched as Casper technology, which is tied to increasing the scalability of the network, is planned during Constantinople.

The goal of the devs was to launch Constantinople ahead of Devcon 4, which is scheduled to unfold in Prague Oct. 30-Nov. 2. But they weren’t willing to do so if it “makes things unsafe” or “pushes people too hard,” according to the call. Dimitry, who was on the call, suggested it would be “a couple of months at least” before Ethereum forks onto proof-of-work chain Ropsten, pointing to the upcoming dev conference as the reason for the delay in progress.

Other devs chimed in, saying the timeline was “overly cautious” considering that Ropsten is a testnet. The devs tossed around the idea of creating a new testnet to replace Ropsten, but that was rebuffed. Ethereum Co-Founder Vitalik Buterin said on the call: “I’d argue that consensus issues on Ropsten happening from time to time is good because it trains an ecosystem of participants on how to react to them.”

The majority ruled, and the developers agreed to test the hard fork on Ropsten in the coming weeks, ultimately landing on the date of early October because there is a break in developer conference activity that week. They’re targeting Oct. 9 and will set the actual block number in a couple of weeks when it’s closer to being released to clients.

Block Mining Times

As for the release of Constantinople, the call host pointed to test cases at year-end 2018, either November or December, after which time the conversation turned to avoid launching the mainnet amid “crazy” block times. Average block mining times are currently hovering at a stable 15 seconds and Buterin doesn’t expect them to “get crazy within two months.”

He referred to last year’s Byzantium upgrade, saying the “general pattern is a doubling at the beginning every 17 days.” As a result, there would likely be a “more than three months of safety,” Buterin said. A wildcard, however, is Byzantium had the “backdrop of a rapidly increasing ETH price and hashrate” whereas now we don’t. As a result, it could take less time.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 60 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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