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The good news for ETH hodlers about insane gas fees

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Cointelegraph By Martin Young

Ethereum and DeFi proponent Ryan Sean Adams has drawn attention to how high gas fees relative to the current Ether price could actually be a bullish sign. 

Citing this week’s Grayscale research paper ‘Valuing Ethereum’ the Bankless commentator claimed that Ethereum is “actually getting cheaper” from a price to sale ratio aspect.

A price to sales ratio (P/S) is usually calculated by taking a company’s market capitalization and dividing it by revenue from sales. In this case, taking Ethereum’s $184 billion market cap dividing it by the total revenue derived from transaction fees provides a similar metric. The lower the P/S ratio, the more attractive the investment (although there’s debate as to how applicable it is to decentralized digital assets.)

According to the Grayscale report, Ethereum’s P/S ratio at the start of 2021 was the lowest it has been for over three years at around 0.02.

While Ethereum is not a company, and transaction fees are not technically sal revenue, institutional-grade investment vehicles such as Grayscale often use traditional methods to help value assets. The report said:

“A lower ratio indicates that the network is generating high revenue relative to Ether’s historical market capitalization, and thus may be undervalued.”

Given the enormous effort going into reducing ETH fees with Eth2, layer-two scaling and the Ethereum Improvement Proposal EIP-1559, this revenue is also far from guaranteed into the future.

However, high transaction fees are indicative of high demand on the network, which is good news for miners and long term holders (if not for those wanting to use it on a daily basis.)

According to BitInfoCharts, the average Ethereum transaction fee has skyrocketed to an all-time high of around $23. This makes using the network totally unviable for smaller transactions which eliminates a lot of DeFi activity for the average trader or investor.

Grayscale and Ethereum advocates, on the other hand, see the positive aspects:

“We can observe from the data that the price of Ether tends to move with underlying activity on the network […] multiple metrics are reaching new highs, including active addresses, hashrate, and network fees – a positive sign for investors.”

Grayscale also suggested that the gas-lowering EIP-1559 could create a positive feedback loop which is extremely bullish for ETH prices.





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Ethereum

Gelato Network launches ‘G-UNI’ Uniswap v3 management token

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Cointelegraph By Andrew Thurman

While Uniswap’s highly-touted v3 has been racing to the top of TVL charts as of late, the need for active management has kept some retail participants out of their pools — a problem that a new product from the Gelato Network is aiming to fix. 

First teased in a community call last week, the Gelato Network has released today the details of their “G-UNI” Uniswap v3 management system. G-UNI aims to perpetually maintain a liquidity range of 5-10% within the current price of an asset pair, with an oracle network checking prices and rebalancing liquidity pool position ranges every half hour. G-UNI also automatically re-invests trading fees for compounding returns.

“Passive G-UNIs work by just providing very broad liquidity, similar to Uniswap v2 that never has to be changed,” an announcement blog post reads. “It thus can be completely free of anyone’s control as it does not require changes in its price range.”

While Uniswap v3 allows liquidity providers to earn more fees by concentrating their funds at specific prices, it opens them up to risk of impermanent loss if the prices of the trading pair moves beyond the provider’s specified range.

The blog post notes that G-UNI’s auto rebalancing brings the benefits of concentrated liquidity, but with the option of passively managing the position in a manner more in line with Uniswap v2. 

“The advantage of this includes that users can sit back and relax as all the difficulties that come with monitoring LP positions are taken care of.”

Composability and incentives

While the new tool will be a boon to passive liquidity providers, the real benefits of G-UNI might be for other DeFi protocols. 

A self-described “Legendary Member” of Gelato, Hilmar, noted that projects can now incentivize concentrated liquidity in “pool 2” liquidity pools. Pool 2 is a colloquialism for a native governance asset paired with a popular base asset, such as ETH or MATIC.

Projects often have to provide ample liquidity mining incentives for participants in pool 2s, as liquidity providers take on the risk of the native governance token collapsing in price. Concentrated liquidity rewards may help stabilize native asset prices to a more regular range. 

Additionally, G-UNI is a ERC-20 token as opposed to a NFT, which opens it up to a broader number of possible applications in DeFi. Many lending platforms accept liquidity pool tokens as collateral, but aren’t yet widely prepared for positions represented as NFTs; G-UNI will allow them to onboard v3 liquidity positions faster. Likewise, yield vaults like Yearn.Finance, which has been planning to incorporate exchange positions for some time, may find it easier to integrate ERC-20s.

G-UNI will be used out of the gate as part of the launch of Instadapp’s governance token. The team is setting aside 1,000,000 INST tokens for INST/ETH liquidity mining, with 3/4ths of the rewards focused on a higher INST price liquidity range.

Per the Instadapp dashboard, the incentivized pools are currently live and offering 2,200% and 1,800% APY respectively.