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Vitalik Buterin and Ansgar Dietrichs Proposes EIP-4488

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Vitalik Buterin and Ansgar Dietrichs Proposes EIP-4488
  • Layer 2 scaling methods employ Optimistic Rollups or ZK-Rollups.
  • Data sharding may be the long-term answer to rollup flaws.

This week, Vitalik Buterin and Ansgar Dietrichs co-authored EIP-4488, which proposes to reduce the gas prices associated with Ethereum Layer 2 scaling solutions. The concept, meant to help alleviate rising gas prices while more substantial alternatives, explored.

Vitalik Buterin and Ansgar Dietrichs, two Ethereum developers, have proposed lowering Layer 2 gas prices temporarily until more effective long-term solutions are created.

While Layer 2 scaling methods employing Optimistic Rollups or ZK-Rollups are “the only trustless scaling solution for Ethereum,” their gas prices are too costly for some. For example, Optimism and Arbitrum often provide 3-8x cheaper costs than the Ethereum base layer, whereas ZK-Rollups may offer up to 100x lower fees.

Attempts to Reduce Layer 2 Gas Prices

EIP-4488 tries to reduce Layer 2 gas prices in two ways. By lowering the cost of transaction calldata, used in both Optimistic and ZK-Rollups. Secondly, by capping the number of transactions calldata in a block. Buterin claims that increasing the amount of data space accessible to rollups is feasible. Especially, now that block sizes are not threatening network stability.

While data sharding may be the long-term answer to rollup flaws, this plan tries to cut gas expenses as soon as possible, maybe by Christmas, according to a zkSync team tweet.

It’s no surprise that Ethereum scaling solutions have matured with Ethereum. Furthermore, Buterin himself asked for an “ecosystem-wide transition to a rollup-centric Ethereum” to reduce gas costs. Only recently, Boba, an Optimistic Layer 2 Rollup solution, reached a total value locked of over $1 billion. A 1,200 percent rise from Nov. 14.

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70% Of Bitcoin Supply Is In Profit – Why Bulls Need To Defend This Level

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70% Of Bitcoin Supply Is In Profit - Why Bulls Need To Defend This Level

On-chain data shows about 70% of the total Bitcoin supply is currently in profit, a level that has historically been important for bulls.

Around 30% Of Total Bitcoin Supply Is Now Underwater

As per the latest weekly report from Glassnode, the percentage of BTC supply in profit has now fallen off to just 70%.

The “percent of supply in profit” is an indicator that measures the percentage of the total Bitcoin supply that’s currently in the green.

When the value of this metric increases, it means more coins have started to get into profit. This leads to holders becoming more probable to sell their coins in order to harvest their gains.

At very high values of the indicator (more than 95%), the price of Bitcoin has usually approached a top as profits are realized.

On the other hand, when the metric moves down, it means more coins are entering into the red. Below certain low levels, investors may capitulate to cut their losses. However, when more than 50% of the supply is underwater, bottoms have historically formed.

Related Reading | Green Energy: In NY, Bitcoin Mining Saved The Oldest Working Hydroelectric Plant

Now, here is a chart that shows the trend in the value of the Bitcoin supply in profit over the last couple of years:

Looks like the value of the indicator has declined recently | Source: The Glassnode Week Onchain - Week 3, 2022

As you can see in the above graph, the metric has been falling down since a few months now. And so at the moment, only around 70% of the Bitcoin supply is in profit.

Related Reading | Bitcoin Miners Show Strong Accumulation As Their Inventories Spike Up

The 70% level seems to have been significant historically as bulls had to defend it twice in the past two years. The first instance was shortly after the COVID crash, between May 2020 to July 2020.

The other instance was 2021’s mini-bear period between May and July. The bulls came out on top during both the periods after a while of sideways movement.

The report notes that the medium-term outlook of the price likely depends on how the market responds to the level this time. If more of the supply enters underwater, those in the red may finally capitulate.

On the other hand, a bullish reversal can bring more Bitcoin into profit and prevent these holders from selling here.

BTC Price

At the time of writing, Bitcoin’s price floats around $42k, up 0.5% in the last seven days. Over the past month, the crypto has lost 8% in value.

The below chart shows the trend in the price of BTC over the last five days.

Bitcoin Price Chart

BTC's price has once again stumbled down in the past few days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, Glassnode.com
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The NFT Investor’s Worst Nightmare: IRS Craves For A Crackdown

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NFT

Last year, when the NFT Everydays: The First 5,000 Days by Beeple sold at Christie’s for $69.3 million, it catapulted the non-fungible token’s market into the mainstream. A large number of people have invested billions in this industry and the boom is not stopping.

Recently, NewsBTC reported an aggressive surge in the NFT trading volume this year despite the falling crypto market. A report by Dappradar showed that in the first ten days of January, NFT trading generated around $11.9 billion.

Our previous report quotes Mason Nystrom, a senior research analyst at Messari, who alleged that “The cryptomarkets are fairly correlated – the market tends to rise and fall with Bitcoin. This has made it surprisingly interesting over the recent downturn as the NFT market has continued to increase in volumes.”

However, the rapid rise of the NFT space has not moved the officials of the Internal Revenue Service (IRS) to shed some light on the taxation parameters for the assets.

Even taxation experts are confused on the matter and can only speculate about the possible outcomes. As a large share of NFT traffic comes from the younger generations, are users prepared for tax filing season? The IRS is gazing at future penalties.

Related Reading | January Proves Turbulent For Investors But NFT And GameFi Seems To Be Eating Good

The IRS Gears Up

In November 2021, the $1.2 trillion infrastructure bill was signed into law by President Joe Biden as a key part of his economic agenda, proposing large investments in the country’s infrastructure. The funding is to come from a few sources involving tax changes.

Watching over the cryptocurrency industry’s boom, the infrastructure bill directly targets its investors, but they fail to educate digital assets users on all the information they need to report. The unawareness could result in possible felony convictions for tax evasion.

However, the law updates the definition of the terms “broker” and “digital assets”, and clarifies that users with regular transactions or any crypto transaction over $10,000 must report that data to the IRS. In this case, taxation works for digital assets in a similar way it does for capital gains relative to stock and bond trades.

However, non-fungible tokens are not close to being as clearly defined by the law as other digital assets, so there is a lot of room left for interpretation. That’s a dangerous game for investors, but the IRS investigators seem eager for cases to surge soon and are ready to crackdown on the market. They might see billions of dollars coming from the NFT gains tax bills.

Are NFT Investors Evading Taxes?

The murky confusion originates because it is not clear whether NFTs are taxable as art collectibles or not. It is fundamental to be aware of this because most crypto assets and stocks have a long-term capital-gains rate up to 20%, but for art collectibles, it’s 28%. And if NFTs are to be considered as ordinary income, the rate could go as high as 37%.

Michael Desmond, the former chief counsel at the IRS who is now a partner at Gibson, Dunn & Crutcher, commented for Bloomberg that the rising NFT trading traffic might force the IRS to clarify the rules, “but it may begin auditing people first.”

The best-case scenario is gearing up and going through large amounts of paperwork, like the NFT investor Adam Hollander did, spending 50 hours checking months’ worth of transactions. He stated that “It’s an absolute nightmare,” and added that “There are people who aren’t going to be willing to do what I’m doing.”

And that nightmare really is the best-case scenario compared to tax evasion penalties.

Related Reading | Sports NFT Marketplace Lympo Suffers An $18.7 Million Hack

Total crypto market cap at $1,9 trillion in the daily chart | Source: TradingView.com
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Mercedes Joins with ART2PEOPLE 5 NFT Artists For G-Wagon NFTs

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Mercedes Joins with ART2PEOPLE 5 NFT Artists For G-Wagon NFTs