VMPX triggers a Gas War, XEN token continues to plummet, who is footing the bill for Jack Levin's tokens?

Author: Grapefruit, ChainCatcher

On July 6, the amount of ETH burned reached 5,336.77, a new high since May 25, marking a shift from inflation to deflation after several days of continuous inflation.

The median Gas fee on the Ethereum chain has also remained high at around 60 gwei. The root cause can be traced back to the ERC20 version of the VMPX token, which opened for minting, driving up on-chain Gas fees and triggering a Gas War.

According to data from Ultrasound.money, as of now, the amount of ETH burned through the VMPX contract has reached 3,695 ETH (approximately $7.1 million), with 17.5% of the ETH burned in the past week coming from VMPX, ranking first among many contracts.

VMPX was originally a BRC20 token issued by Jack Levin, the founder of XEN Crypto (XEN), with a total issuance of 108.62 million on Ethereum, allowing users to mint by only paying the Gas fees on the Ethereum chain.

Why did the VMPX contract cause Ethereum Gas fees to soar? What is the relationship between VMPX and XEN Crypto? Who is paying for this?

VMPX Triggers Ethereum Gas War Causing Controversy, Now Below Issuance Price

Although the issuance of VMPX has turned ETH output from several days of inflation to deflation, the minting phase caused Ethereum network fees to jump from around 20 gwei to nearly 60 gwei, triggering a Gas War, which has been met with criticism from the crypto community.

VMPX is a BRC-20 token launched in May this year, with a total issuance of 108,624,000 (approximately 10.86 million). The ERC-20 version of VMPX (also known as eVMPX) can be seen as a mapping of the BRC-20 version, but done through additional issuance. According to official statements, VMPX ERC-20 (eVMPX) was created to mirror VMPX BRC-20 (also known as bVMPX), linking the Ethereum and Bitcoin chains, with both tokens having the same supply, hoping that bVMPX and eVMPX can be exchanged 1:1 across chains.

The issuance of eVMPX adopted a free and fair method, similar to ERC20 token issuance, where users only need to pay Gas to mint, on a first-come, first-served basis. This method of issuance has led to congestion on the Ethereum network and rising Gas fees.

VMPX ERC20 opened for minting in the early hours of July 5, allowing users to mint a maximum of 39,000 each time. According to a chart from founder Jack Levin, the initial launch caused Ethereum Gas to spike to 200 gwei before subsequently dropping and stabilizing around 50 gwei. However, prior to this, Gas fees on the Ethereum chain had been around 20 gwei, and the multiple increase in Gas fees has caused dissatisfaction among many users.

The earliest developer in the crypto community to pay attention to this project, @0xCygaar, claimed on Twitter that the VMPX minting contract serves no purpose other than increasing the overall Gas of the network. It only causes nodes to run unnecessary code, burning money and increasing other people's Gas fees.

In response to this tweet, Harrison, co-founder of the Ethereum Gas fee tracking platform PopPunk, commented that some users paid as much as 1.36 ETH (approximately $2,516) in Gas fees while minting VMPX. Additionally, DeFi data platform EigenPhi added that the average Gas fee for minting VMPX is 0.167 ETH, about $317. In response, some users warned against minting, stating that buying on DEX is cheaper than free minting.

Subsequently, Polygon smart contract engineer @Qedk tweeted that the rise in Ethereum Gas is due to someone issuing a PoW version of ERC20, advising users not to buy (do not buy). He also added that there have been 20 unsuccessful attempts to mint, and users should not try to save on Gas fees.

In addition to the high Gas fees during minting, some users discovered that the VMPX issuer is quietly profiting through liquidity pools. One user stated that the VMPX issuer has stealthily migrated the VMPX-WETH LP liquidity pool from Uniswap V2 to V3 and set the trading fee to 1%, with the official party profiting through market making.

According to Uniswap data, since its launch on July 5, the trading volume of the VMPX-WETH liquidity pool has reached $11.31 million, with approximately $113,000 in fees at a 1% rate. If the user's claims are true, it means that in just two days, the official party has earned $113,000 solely from market-making fees.

Trading situation of the VMPX-WETH liquidity pool on Uniswap

Currently, the minting of eVMPX has ended, and Gas fees on the Ethereum chain have dropped to around 24 gwei (approximately $0.94). There are about 4,500 addresses that participated in the minting of VMPX, with an average cost price of $0.068 per eVMPX, now quoted at $0.05, having fallen below the issuance price.

From XEN to VMPX Tokens, Who is Paying?

The VMPX, which claims to be exchangeable 1:1 with the BRC20 version, has inconsistent prices on the two chains, with the BRC20 VMPX priced at $0.072 and eVMPX priced at $0.05. The BRC20 VMPX has dropped from a high of $0.29 to $0.07 since its exchange launch in May. The official website of VMPX provides only a few sentences about its token, which currently has no practical value.

So why has the VMPX project attracted user attention? Who is paying for it?

User interest in VMPX can be attributed to two main factors: first, the free issuance method allows users to obtain it by only paying Gas fees, which is not a high cost for users; more importantly, the founder of VMPX is Jack Levin. He claimed to be Google's 21st employee and initiated the crypto project XEN Crypto (XEN), creating a new mechanism for participation-based mining. However, it has been confirmed that he was indeed an early employee at Google, but the 21st employee was Marissa Mayer, who later became the CEO of Yahoo.

XEN Crypto launched in October last year, using a PoP (Proof of Participation) mining mechanism, where users can participate in mining by paying Gas and interacting with the contract.

The amount of XEN tokens mined by participants depends on the order of participation, ranking, and the duration of XEN token locking. The earlier the participation and the longer the locking time, the more XEN tokens are produced. The launch of XEN also triggered a Gas War, with millions of addresses participating in its mining.

However, since its launch, the price of XEN tokens has been on a downward trend, falling from a high of $0.0025 to around $0.00000108.

From the price trend, XEN is undoubtedly a failure. So why is Jack Levin issuing a VMPX?

In fact, the VMPX token is not the first BRC20 token issued by Jack Levin. Before this token was launched, he had issued several BRC20 tokens and led or indirectly participated in the issuance of four tokens, including PUSY, XUNI, EPIC, and DRAC. Among these, PUSY, XUNI, and EPIC were issued within a day. These tokens did experience a short-term rise, but ultimately saw a more significant price drop, and now these four tokens have disappeared from public view, with no one paying attention or discussing them. Therefore, some users jokingly refer to Jack Levin as a "Web3 serial entrepreneur, harvesting one crop after another."

What is the reason behind the continuous issuance of tokens? These actions can be seen as Jack Levin's self-rescue efforts for the XEN Crypto project.

The issuance of XEN is unlimited, with 13.4 trillion already minted. Nearly a year after its launch, it still has no value or application scenarios, and the price continues to decline, with users no longer willing to pay, requiring a new story to sustain it.

Regarding how to empower the XEN token, XEN Crypto has attempted several actions, such as the NFT project XENFT, the token issuance project DBXe, FENIX, etc. However, most of these projects have similar gameplay, with the core being to burn XEN tokens to mint NFTs or new tokens. However, due to the excessive supply of XEN tokens, the new project tokens are even more useless, criticized by users as burning XEN to create a worse token.

In June this year, XEN Crypto officially released the X1 public chain white paper, which is an EVM public chain, issuing a token XN with a cap of 1 billion, used for transaction Gas, validator rewards, and establishing consensus and security. However, 333 million of the XN tokens are generated by burning XEN tokens, through daily auctions on Ethereum. Every day, 1 million XN tokens will be released into the pool, and users can obtain a share of the pool by depositing and burning XEN in exchange for XN, with the auction lasting 333 days.

Moreover, VMPX is also part of the XEN ecosystem, where users can convert VMPX to XN at a ratio of 1:3. These XN tokens can be used to provide liquidity for the bridge between Bitcoin, Ethereum, and the X1 chain.

However, the X1 public chain has its own token XN, and only part of the issuance of XN needs to be generated by burning XEN. The XEN token has no other value. Given the current output of XEN, it is difficult to see improvement in the short term without changing the issuance mechanism or conducting large-scale burns.