What's Driving Token Prices? June 21, 2023

BNB (+1.7%) -BNB Chain announced a big scalability initiative for its chain this week by using a fork of OP Stack to develop its own rollup. BNB Chain already has some of the lowest fees of any L1 but this new rollup will lower fees even further. Also this week, Binance also announced the discontinuation of servicing users in the Netherlands and the UK as the regulatory noose seems to tighten around the company.
ETH (+8.9%) - A developer proposal unearthed this week includes changes to Ethereum’s maximum validator balance from 32 ETH to 2,048 ETH. The objective of increasing the maximum balance is to lower the number of validators in order to speed up finalization and reduce messages between validators. The proposal is currently being heavily debated because a large number of staking pool providers that dominate the space (e.g. Lido, Coinbase, Rocketpool) are essentially operated by the same entity but each validator has to act independently on the network despite this. There is therefore an inherent tradeoff between speed (less validators) and decentralization (more validators).
OSMO (+10%) - Decentralized exchange, Osmosis, passed 3 major tokenomic upgrades through governance. The upgrades included: a 67% reduction in token inflation amounting to an inflation rate of 11% annually, the launch of concentrated liquidity pools, and a 0.15% taker fee for the protocol. Although these are all very positive changes for Osmosis in the long-term, the overall DEX market has struggled to outperform in a meaningful way.
FXS (+22%) - Decentralized finance project Frax had two major announcements which caused it to outperform the broader market this week. First, the project announced its future plans to launch Fraxchain, a hybrid rollup. The layer-2 solution will likely pay out transaction fees to FXS stakers and is expected to launch at the end of this year. The project also initiated a $2m buyback of FXS tokens over the next 5 months with another proposal in discussion for a buyback based on price instead of time. Although the team stated that this would not create a floor value for FXS, the buybacks will seek to purchase tokens below $5.

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