The cryptocurrency market is known for its price volatility, with sudden price spikes or drops being a common occurrence for major and minor cryptos alike. However, such volatility has recently extended into a surprising area: Ethereum’s Goerli testnet.
Designed initially to be free for developers, the ETH Goerli testnet token (GETH) witnessed a spike of 165% in recent days before crashing down to $0.293 as of writing. The price of Ethereum (ETH) has also increased and as of writing sits at $1,632, recording a gain of 1.8% in the past 24 hours as it broke through the $1,600 mark.
The trading of GETH was made possible by LayerZero, a cross-chain platform that made it possible for the Ethereum mainnet and the Goerli testnet to exchange the ether. LayerZero initially launched a bridge to the Goerli testnet to exchange ETH for GETH at a price of $0.10 before its price took off, hitting $0.42 on Sunday before plummeting to its current price.
Public Goods by LayerZero
We're excited to introduce the Testnet Bridge as the first of several tools we launch for the Ethereum developer community.
Cliffs: Get Goerli-ETH quickly, easily, and begin testing ASAP without camping faucets or feeling stranded pic.twitter.com/CTxZFxwgvF
— LayerZero Labs (@LayerZero_Labs) February 21, 2023
The Goerli testnet is a cross-client network that uses proof-of-authority and is frequently used to run simulations prior to mainnet launches. It’s separate from the core Ethereum ledger and therefore, traders can transmit tokens from other chains to Goerli thanks to its cross-chain functionality.
The core ethos behind enabling the trade was to devise a means by which developers could acquire ether for use on the testnet in a more user-friendly way than the typical methods of using faucets or approaching developers directly for coins.
The number of developers who are actively contributing to Goerli has significantly increased, leading to speculation that, because GETH now acts in the same manner as any other liquid token in the crypto market, coins gained from the faucet will be considered taxable income.
While the surge in GETH’s price is novel, it also raises questions about the implications of monetizing a testnet’s native currency. Detractors have cautioned that making the testnet’s native currency a tradable commodity, which is intended to facilitate pre-production testing, would make the testnet less fit for the task it was primarily created to accomplish.
Mudit Gupta, Chief Information Security Officer at Polygon, expressed his displeasure on Twitter that the coin, which was intended to be free, was trading at any value at all.
“Goerli eth is trading for ~$0.69. Not nice. Testnet ether is supposed to be free but is being marked up by speculators. Keyboard warriors will tell you that the developers are buying it but no, they are not. Maybe 0.1% are buying for consumption,” he stated in the Tweet. “This is the start of the end of Goerli testnet. It served us well.”
Goerli eth is trading for ~$0.69. Not nice.
Testnet ether is supposed to be free but is being marked up by speculators.
Keyboard warriors will tell you that the developers are buying it but no, they are not. Maybe 0.1% are buying for consumption.
— Mudit Gupta (@Mudit__Gupta) February 26, 2023
Cryptocurrency faucets are required for blockchain testing, and are used to dispense tokens with no real-world value. They are built with the intention to allow developers to test features without investing any real money. By monetizing the native currency of the Goerli testnet, developers could lose access to a valuable tool in the development process.
The price surge of testnet ether raises important questions about the implications of monetizing a testnet’s native currency. While it may seem like a convenient way for developers to acquire ether for testing purposes, it could ultimately do more harm than good by limiting access to a valuable development tool. The crypto community must carefully consider the pros and cons of trading Goerli testnet tokens or any testnet currency before making a decision on how to address this issue.
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