EOS RAM prices have witnessed a sharp surge in the last week.
This comes when EOS is currently transitioning to mainnet. The surge in prices was a result of investors hoarding RAM and anticipating prices to rise further.
The cost of 1 MB of RAM on its blockchain peaked at 919.64 EOS on July 03, 2018. It would correspond to $8160 for 1MB of RAM.
This is significant because any developer who creates a decentralized application for the EOS blockchain has to acquire database space. He can purchase RAM from the block producers according to the requirements of his decentralized application.
Sudden Rally in Prices
A sudden rise was observed in EOS RAM prices between July 01, 2018 and July 03, 2018. EOS prices rallied from around 100 EOS to high of 919.64 EOS in that duration.
EOS RAM prices had surged almost 900% within three days.
It has been reported that investors began buying RAM in anticipation of prices rising higher. This investor speculation created a shortage of computational resources for EOS developers.
If more developers begin working on dapps built on the EOS blockchain, then they will need more RAM. Higher demand pushes prices up.
Investors bought RAM anticipating that it would give better returns than its digital parent currency. Hence it made more sense to hold and accumulate EOS RAM rather than EOS.
RAM leasing model of EOS
The EOS RAM model was launched to incentivize token holders to sell their excess and unutilized memory back to the network.
Block.one, the company behind the development and launch of EOS had pivoted to this model after the announcement of Dawn 4.0. At the time of the announcement the team had said,
Under Dawn 4.0 the system contract now buys and sells RAM allocations at prevailing market prices. This may result in traders buying RAM today in anticipation of potential shortages tomorrow. Overall this will result in the market balancing the supply and demand for RAM over time.
Though EOS had anticipated that there would be trading of RAM, it did not foresee such an extreme price surge.
EOS had acknowledged that RAM prices would increase if there were to be a shortage of database space.
It also has provisions to increase RAM if developers utilize all existing memory, but additional space cannot be added to the network if investors are accumulating it. It will still lead to a shortage of memory space as more investors will buy the additional RAM available.
Solution to EOS RAM price problem
There are some ways to stabilize trading prices of EOS RAM.
The 21 block producers could stake their coins and decide to increase RAM capacity.
Block.one has itself said that storage would rise in the future and it could reach 4TB or even 16TB.
Another solution could be that the block producers confiscate all unutilized RAM from investors and bring it back to the open market. This would be highly controversial and would risk negativity around the EOS blockchain.
EOS RAM prices have undergone a significant correction. It now costs 321 EOS to acquire 1MB of space. Though it may still be expensive for developers to spend almost $2851 for 1MB of database space.