Rising fees on the Ethereum network: Blame crypto airdrops

In a sensationalist way it was called an attack by EOS.
You are reading about: "Rising fees on the Ethereum network: Blame crypto airdrops"

By Diana (Editor)

Published July 16, 2018

A sensationalist claim appeared in an article on SludgeFeed - EOS is supposedly organizing an attack on ETH network by spinning off random unbacked token airdrops.

We know something about useless token airdrops, that’s how our #DeadParrot #Crypto section came to exist:

  • Many cryptocurrencies that were given away to people in exchange for social media work are now becoming useless token spam.
  • They will never get listed on a digital currency exchange, some may exit scam, some will barely survive for a relatively long time but indeed so barely that they will be considered dead anyway.

Token airdrops as affordable marketing

The social media following built via the token giveaway will be laid aside for a while, then it will get rebranded and reused. Token drop is a cheap way to build a user base, and a reliable one at that: Tech enthusiasts love the idea of being gifted a digital token that could potentially be worth a fortune one day.

No matter how many times you squeeze it, there will be the juice.

The current popularity of ERC20 standard Ethereum token airdrops has brought the same critical response as we have seen in 2017 when Bitcoin forks were all the rage: It is not a free lunch.

  • The endless transfers of coins are flooding the network
  • People want to transfer quickly before a random deadline goes so they will set an extra high fee
  • The result is costlier and slower network for everybody

In the case of Bitcoin the fork resulted in a chain split but a BTC transfer was needed for security. In the case of an ETH token airdrop, the tokens transact on the Ethereum network. The negative consequence of flooding the blockchain is present as well.

What has EOS to do with ETH gas prices?

The blame for token spam was first thrown on EOS in an article on TrustNodes.

The factual backup for this theory is based on confluence of events only, though:

  • Leading up to the EOS mainnet launch on their own blockchain and move away from the ETH blockchain, the ETH network activity was rising
  • Also leading up to the EOS mainnet launch there was a lot of dodgy token airdrops that were hyped up on social media (just as there is now)

It is undeniable that the EOS mainnet launch had some effect on the Ethereum network but it being the case that cryptocurrency speculation is a major part of the network activity and considering that claiming the EOS tokens on EOS blockchain required identity registration, a lot of traders were looking to take their EOS pre-launch hype profits. That naturally resulted in a lot of activity on the ETH blockchain.

This even coincided with steep rise in margin funding for EOS - someone apparently took a lot of EOS off the book on Bitfinex by the end of May 2018.

The blockchain.info chart of total exchange traded volume stats shows the activity at the end of May 2018 and around the June 6th date of EOS launch was indeed spiking:

usd-exchange-trade-volume

On the other hand, the EOS attacking ETH conspiracy is fueled only by a single reported incident - a token airdrop being closely related to an ETH address that received a lot of crowdfunded EOS.

While both token airdrops and the EOS mainnet launch have had some impact there it is by all means a stretch to call out EOS airdrops as the reason for rising gas prices on the ETH network.

The crypto airdrop hype is likely to cool down in time as people will get progressively disillusioned with their tokens becoming useless and perhaps we will get back to the good old 2016 model of earning tradable cryptocurrency for actual work.


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By Diana (Editor)

BIO: I'm a nobody and nobody cares. I like researching business models so that later I can fail miserably anyway. Editor at @BOC__Official. ·

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