During the bull run of 2017, the top blockchains, Bitcoin and Ethereum, were subject to extremely high transaction fees.
At one time, it cost $50 to send BTC from wallet to wallet in a reasonable amount of time. And it once cost a handful of dollars to, say, create a “CryptoKitty” on the Ethereum blockchain.
While both networks have seen technical improvements since then, fees have still been subject to rocketing higher, as has been seen over the past few weeks.
Fixing Ethereum’s High Transaction Fees
Early in May, analysts started to notice that spending Ethereum was starting to become expensive.
One data analyst in the space noted that by May 15th, the cost of gas on Ethereum reached 41 Gwei — up by 300% from just weeks earlier and over 1,000% that seen at the start of 2020.
Gas prices on Ethereum have been skyrocketing over the past month. Average gas price is now 41 Gwei, up 4x since end of April.
It uses oscillates between 10-15 outside of high periods of stress (i.e. Black Thursday). pic.twitter.com/RJmdquQNdC
— Ceteris Paribus (@ceterispar1bus) May 15, 2020
This has persisted, with the cost of gas trending around 25-30 Gwei as of the time of this article’s writing. As Su Zhu, CIO of Three Arrows Capital, wrote in a recent tweet: “[I] have spent more money for gas on ethereum than gas in real life for quite a few days now.”
Like with BTC, high transaction fees on Ethereum appear when there is an increase in demand to send the cryptocurrency.
The increase in fees has led to discussions regarding scalability.
Decentralized exchange 1inch.exchange suggested that Ethereum miners should increase the block limit to accommodate more transactions every 14 seconds (every block). Currently, the block size is limited to 10 million, but the exchange suggested up to 100 million.
26.5% of the responders to the poll accompanying the tweet wanted the 100 million block limit option, while 6.2% wanted 50 million and 17.6% wanted 25 million. The rest voted for the “no” option.
— 1inch.exchange (@1inchExchange) June 4, 2020
There are multiple reasons behind this trend in high transaction fees, though it boils down to three core reasons:
- There is more demand to send coins between exchanges due to the recent volatility.
- There has been an explosion in the popularity of Ethereum-based Ponzi schemes/scams. One is called “ETH,” and it has spent tens of thousands of dollars on transactions over the past few days alone.
- Stablecoins have continued to see mass adoption on Ethereum, with there now being $7 billion worth of U.S. dollar value based on the blockchain.
Bitcoin Is Having a Similar Problem To Ethereum
As a pertinent aside, Bitcoin has been having similar “issues” with high transaction fees. According to BitInfo’s charts, the average BTC transaction
Some don’t see this as an immediate problem for the cryptocurrency though, as BTC doesn’t have the same use case as Ethereum. And some see high fees as a byproduct of the chain’s extremely robust (and unmatched) security.
Featured Image from Shutterstock Price tags: ethusd Ethereum Transaction Fees Are Still High — and Many Users Want Solutions ASAP