What the CHI is going on?
Assets covered: CHI
Metrics used: Price, Avg gas fees
Average gas fees on Ethereum is at an all-time-high. Did you know you could save on those fees with the CHI token?
But that's not the only thing it's being used for.....
Let's take a quick look.
What is the CHI token?
The Chi gastoken (CHI) is an ERC20-standard token aimed to help reduce 1inch users' transaction fees. Chi is pegged to the Ethereum network’s gas price.
Why do you need a gastoken in the first place?
Every transaction on the Ethereum network requires some gas. A gastoken, such as Ethereum's GST2, facilitates transactions with the same amount of work but less gas. To encourage smart contracts to erase unnecessary storage, Ethereum provides a refund for each burned element, such as a token. As a result, in the process of burning, a gastoken's smart contract erases storage filled during minting. CHI, 1inch's implementation of gastoken, is better optimized than GST2 and, therefore, enables users to save more.
How much can you save using Chi gastoken?
Transactions on the Ethereum network require substantial gas, pushing transaction fees to $10 per transaction or more. The burning of Chi tokens in the same transaction would reduce gas costs by almost one half. Please, note that for substantially reducing your transaction costs, you need to obtain the Chi gas token (CHI) when the gas price is at least one half of what it will be at the moment of releasing (burning) the gas token. E.g.: if you bought (minted) CHI at 20 gwei, to profit from burning CHI, you have to burn the gas token at 40 gwei minimum, achieving a x2 ratio. More calculations you will find here.
You can read more about the CHI token here.
For anyone that heavily uses DEXes, especially in a high gas fee environments like now, it makes pretty good sense to use the CHI token on the 1inchexchange as there isn't really any swap platforms that offers it (E.g Uniswap, Sushiswap).
DeFi seasons and how CHI behaves
For anyone unfamiliar with the DeFi Bull season of 2020, it was a time where:
- New Defi projects launched every other day
- Valuation of newly launched DeFi projects went bonkers
- Market participants becoming degens and aping into every Defi project
- Uniswap casino seeing highest volumes, trades, etc
- Almost everyone was making crazy gains.
This was a time where the 1st proper wave of cryptonatives experienced the power of DeFi (even though it existed prior).
Then.... the bubble popped. As valuation of DeFi projects came crashing down, so did gas fees and eventually CHI token's price since there wasn't any strong demand for it any longer.
While it's not meant to be a speculative token, market participants have made it so.
One could accumulate CHI during the DeFi bear season in anticipation for the next DeFi bull season. There's also arbitrage opportunities around it.
In some sense, perhaps the acceleration in CHI's price (as we observed in mid-december) may indicate a DeFi bull season is just around the corner?
Yet again, we are seeing skyrocketing CHI prices and avg gas fees. In fact, we are at All-time-highs at the moment.... could this be a warning sign that things are over heating?
This crazy rise is comes as no surprise as new market participants have entered the space in droves and can be observed by exchanges' systems being stress-tested.
Even Google search trends on "defi" also increased and is making an ATH at the moment.
So, the next wave is here and we are having sky high Defi activity... as the old saying goes... "The crowd always comes in at the top". Perhaps we might just be topping soon.
That said, it's not over for DeFi, it's more of a much needed healthy correction from the exuberance before us.
And when that happens, CHI is likely to take a dive well.