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Research: Ethereum?s new economic model not ?lucrative enough? to keep it secure

Ethereum ETH
Delphi Digital
Hard Fork
opportunities.”Delphi Digital
Ethereum co-
UTC March

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Vitalik Buterin

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the Proof-of-Stake

Ethereum price

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The New York Times
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Delphi Digital researchers noted that the number of new token sales had “cooled off” considerably in the second half of 2018, and says their disappearance has led to a lack of fundamental buying pressure in Ethereum‘s markets.More generally, as there are considerably fewer Ethereum-based ICOs to buy, retail investors have less incentive to purchase Ether, as participating in ICOs is really a primary use-case for the cryptocurrency.This effect has been amplified by existing projects selling the Ethereum raised to fund their development efforts, which Delphi researchers consider a big contributing factor to its overall price decline.Delphi analyzed 54 of the largest token sales in ICO history (from 2016 to now), strictly using data that could be verified on-chain.It found that a total of 16.25M ETH was raised, of which 9.66M ETH had been already been siphoned off to standard cryptocurrency exchanges.At the current value, this amounts to $1.3 billion, but at the height of the cryptocurrency market 9.66M ETH was worth over $13 billion.“We also isolated the amount of ETH that was eventually sent to an exchange address as it is reasonable to assume that ETH sent to exchanges was liquidated,” wrote Delphi. This means that once the user deposits their tokens and is credited with the equivalent amount of ETH to use for staking purposes, they will not be able to “withdraw their funds” until the second phase of the consensus switch.“This essentially means that participating as an early validator locks up your funds for around two years, which could be risky,” noted Delphi’s spokesperson.All these challenges exist at a time when market sentiment for Ethereum has actually turned positive. “The last time [we observed] such a prolonged period of positive average daily sentiment was in March-April 2018, when the market value of ETH more than doubled from $36 billion to $84 billion.”Still, Delphi Digital warns that Ethereum‘s framework for its Proof-of-Stake proposal, in its current form, might not work out as its development team might hope.“What we’re suggesting is that the planned economics they have in place may not be lucrative enough to incentivize users to stake their ETH to help secure the network,” Delphi told Hard Fork.“The variety of scenarios we’ve shown [in our report] make it clear that the currently proposed yield [for validating transactions] will likely be insufficient,” it continued.

As said here by David Canellis