A new Filecoin proposal could lead the FIL token price into a death spiral as the coin made 25% of its block rewards available to the miners but the upgrade is concerning for the traders. In today’s altcoin news, we can see more about the analysis.
Filecoin activated an improvement proposal FIP 004, making 25% of each block reward immediately available to miners. The update addressed a few complaints which increased right after the network went live on October 15th. According to the official Slack of the project, Filecoin was successfully upgraded at block height 170,000 and the process was mandatory for all nodes. Filecoin’s launch was troubled with rumors about the miners’ strike as some media outlets reported that miners halted operations because of the high initial pledge requirements.
The network requires miners to lock their FIL tokens according to the new Filecoin proposal in order to be able to store data and produce blocks. The pledge size is determined as 20 days worth of block rewards and a share of 30% FIL circulating supply target over the one token per block. It’s worth noting that the token’s price increased by more than $200 on some trading exchanges and one of the main reasons behind the surge was the low circulating supply of less than 1% of the entire supply.
About 100% of the mining rewards were vested in the 180 days making it hard for miners to pledge unless they purchased tokens on the open market. Protocol Labs which is the company behind Filecoin denied the strike and fixed the issue. Besides making 25% of block reward immediately available, the company promised to offer miners some loans. The introduction of the new Filecoin proposal of FIP-004 raises concerns for the holders of the tokens.
With a daily production rate of 145,000 FIL tokens, the daily reward surpasses 35,000 FIL but there could be an important and prolonged supply pressure on the price if miners choose to liquidate the tokens instead of pledging them. Considering how high the price surged, an accelerated increase in the circulating supply doesn’t look really optimistic about the price if the demand remains the same.
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