Shiba Inu (SHIB), one of the most popular meme coins in the crypto market, is facing a crucial moment. Its layer-2 network, Shibarium, has seen gas fees skyrocket by a staggering 2,024%, raising serious concerns about SHIB’s future value. As network activity increases, so does the tension between Shiba Inu’s deflationary model and the surging costs associated with its ecosystem. The impact on SHIB’s value is now under scrutiny.
The Role Of BONE In Shibarium’s Ecosystem
Shibarium recently hit a significant milestone with a 70% increase in transaction volume, jumping from 4,537 to 7,715 transactions. Additionally, active accounts on Shibarium surged by 157%, from 42 to 108, according to ShibariumScan. Despite these achievements, the role of BONE, the native token of the Shiba Inu ecosystem, has raised questions about its potential threat to SHIB’s long-term value.
BONE is used to fuel transactions on Shibarium, meaning every time a transaction occurs, BONE is the token that gets spent, not SHIB. This dependency on BONE has led to a recent 3% increase in its value, with the token trading at $0.425079. However, this rise comes at a time when SHIB’s deflationary mechanism—burning SHIB tokens by sending them to inaccessible wallets—faces challenges due to soaring gas fees.
Will Gas Fees Undermine SHIB’s Deflationary Model?
A critical aspect of SHIB’s value proposition is its deflationary nature, where tokens are periodically burned to reduce supply and increase scarcity. On Shibarium, users convert a portion of BONE into SHIB, which is then burned to maintain the token’s value. However, with gas fees increasing by over 2,000%, stakeholders may be less willing to transact on Shibarium, reducing the number of SHIB tokens burned.
This is particularly concerning given the recent data on SHIB burns. Only 240,000 SHIB tokens were burned recently—a massive drop of 85% compared to the earlier 1.7 million tokens. If high transaction costs deter users from interacting with Shibarium, the SHIB burning process may slow down, affecting the token’s price stability.
Despite the concerns around Shibarium’s gas fees, SHIB has managed to post some positive market performance. The token has seen over a 5% increase in value over the past week, aligning with Bitcoin’s recent bullish trend. However, this momentum may be short-lived if the burn rate continues to decline.
Shibarium’s network, while celebrating a total of 416.785 million transactions, has seen a sharp drop in activity, with daily transactions plummeting from 30,000 in mid-August to just 11,000 at present. This could indicate that new investors are hesitant to enter the Shibarium ecosystem due to high transaction costs.
What Lies Ahead for SHIB?
The future of SHIB now depends on several factors, including the sustainability of Shibarium’s transaction volume and Bitcoin’s performance. With gas fees surging, the deflationary model that SHIB relies on may face significant hurdles, leading to potential price declines if burns slow down further.
However, if Shibarium can maintain its appeal and transaction volume despite the rising costs, SHIB holders may have less to worry about. The next few weeks will be crucial in determining whether Shiba Inu’s deflationary mechanics can withstand the pressure of soaring gas fees or whether it will dampen the token’s long-term prospects.
In short, while Shibarium celebrates its network milestones, high gas fees pose a serious threat to SHIB’s deflationary model, leaving investors at a critical crossroads.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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