36 - The DeFi Blockspace Cycle | Nic Carter
Bankless
Bankless
4.7 • 1.2K Ratings
🗓️ 26 October 2020
⏱️ 85 minutes
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Summary
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36 - The DeFi Blockspace Cycle | Nic Carter
Nic Carter recently released an article titled "Public Blockchain Fee Cyclicality and Negative Feedback Loops"...
... simplified "transaction fees get higher, and that incentives people transact less, and then that lowers transaction fees and that incentives people to transact more"
According to Nic, there's no equilibrium found upon public blockchains with inflexible block size; the demand to purchase blockspace will always be volatile, across all time frames.
Another perspective: constraints on blockspace availability dramatically impacts the kind of usage that is feasible to happen on the base-layer blockchain.
Transactors who are transacting large transactions will pay for higher fees! This severely impacts the markets that are supported by public blockchains! Constraints on block space are constraints on market participants!
David, Ryan, and Nic go through Nic's process is disecting the data that created these conclusions. Nic gives his perspective as to the ultimate pattern that emerges from this data.
David reads Nic's article aloud on the Bankless YouTube! Useful for listening to the episode! https://www.youtube.com/watch?v=RZ1X_3I5KrI&t=666s
Actions & Resources:
Read Nic’s articles Ethereum’s Fees Mean Choosing Between a World Computer and a Financial Network https://www.coindesk.com/ethereums-fees-mean-choosing-between-a-world-computer-and-a-financial-network
Public Blockchain Fee Cyclicality and Negative Feedback Loops https://medium.com/@nic__carter/public-blockchain-fee-cyclicality-and-negative-feedback-loops-1620141a8a87
The Adaptive Markets Hypothesis Robert Low https://blogs.cfainstitute.org/investor/2017/12/18/the-adaptive-markets-hypothesis-a-financial-ecosystems-survival-guide/
https://www.alphasimplex.com/wp-content/uploads/2004/09/The-Adaptive-Markets-Hypothesis.pdf
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Transcript
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| 0:00.0 | Welcome to Bankless, where we explore the frontier of internet money and internet finance. |
| 0:19.3 | This is how to get started, how to get better, and how to front-run the opportunity. |
| 0:23.6 | This is Ryan Sean Adams, I'm here with David Hoffman, and we're here to help you become |
| 0:28.4 | more Bankless. David, how are you doing? |
| 0:31.0 | Feeling a little bit more educated about block space and fee markets after this podcast |
| 0:36.5 | with Nick Carter. Nick Carter recently put out this article called Public Blockchain |
| 0:41.4 | Fee Cyclicality and Negative Feedback Loops, and we kind of go into what the significance |
| 0:48.3 | of what Nick discovered when he was researching for this piece. I thought it was a very interesting |
| 0:53.6 | piece to the point where I actually read it on the Bankless YouTube. If you are the |
| 0:59.0 | type of listener that likes to hear things as you would be since you are hearing this |
| 1:02.4 | podcast, I've read this article on the Bankless YouTube. There's a lot of implications |
| 1:06.7 | in there about what this means for a DeFi, because DeFi specifically has a lot of implications |
| 1:12.7 | for what Nick is talking about in this feedback loop. In addition to all of that, we get |
| 1:18.2 | him on the Bankless podcast to go through some of these concepts with him together. |
| 1:23.0 | Yeah, I feel like we've never actually done a deep dive episode, David, on a theory |
| 1:28.8 | and block space, and particularly gas fees, like gas prices. Why do they rise? And why do |
| 1:34.6 | they fall? I think a lot of folks who are going Bankless experience that this summer and |
| 1:39.2 | have over the past few months, like you wake up and sometimes gas prices, you know, 20 |
| 1:44.3 | weigh or 80 weigh, and other times it's 500, and you're wondering why. And you actually |
| 1:49.2 | feel the downstream implications of that. Like, you know, what transactions are you willing |
| 1:54.4 | to do at a weigh fee of 20? Might be completely different than the transactions you're unwilling |
| 2:01.3 | to do, I suppose, at a weigh fee of 500. And Nick provides some analysis, I would say, of |
... |
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